UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of the earliest event reported)
October 18, 2005
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Valhi, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 1-5467 87-0110150
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(972) 233-1700
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Item 1.02 Termination of a Material Definitive Agreement.
The Current Report on Form 8-K of Valhi, Inc. ("Valhi") dated October 18, 2005
and filed with the Securities Exchange Commission under SEC Accession No.
0000059255-05-000053 on October 19, 2005 (the "Form 8-K) is hereby amended by
deleting the third paragraph under Items 1.01 and 1.02 and replacing it with the
following:
"The foregoing discussion of the Prepayment and Termination Agreement and
the Amended and Restated Company Agreement are qualified in their entirety by
the specific provisions of such documents and various related agreements, each
of which are attached hereto as Exhibits No. 10.1 through 10.7 and incorporated
herein by reference."
Item 9.01 Financial Statements and Exhibits.
The exhibit list to the Form 8-K is hereby amended by the addition of the
following exhibits:
(c) Exhibits.
Item No. Exhibit Index
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10.1* - Prepayment and Termination Agreement dated October 14, 2005 among
Valhi, Inc., Snake River Sugar Company and Wells Fargo Bank
Northwest, N.A.
10.2* - First Amendment to Deposit Trust Agreement dated October 14, 2005
among ASC Holdings, Inc. and Wilmington Trust Company.
10.3* - Second Amended and Restated Pledge Agreement dated October 14,
2005 among ASC Holdings, Inc. and Snake River Sugar Company.
10.4* - Second Pledge Agreement (SPT) dated October 14, 2005 among The
Amalgamated Collateral Trust and Snake River Sugar Company
10.5* - Second SPT Guaranty dated October 14, 2005 among The Amalgamated
Collateral Trust and Snake River Sugar Company.
10.6* - Option Agreement dated October 14, 2005 among Valhi, Inc., Snake
River Sugar Company, Northwest Farm Credit Services, FLCA and
U.S. Bank National Association.
10.7* - Amended and Restated Company Agreement of The Amalgamated Sugar
Company LLC dated October 14, 2005 among The Amalgamated Sugar
Company LLC, Snake River Sugar Company and The Amalgamated
Collateral Trust.
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* Filed herewith.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VALHI, INC.
(Registrant)
By: /s/ Gregory M. Swalwell
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Gregory M. Swalwell
Vice President
Date: November 15, 2005
INDEX TO EXHIBITS
Item No. Exhibit Index
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10.1*- Prepayment and Termination Agreement dated October 14, 2005 among
Valhi, Inc., Snake River Sugar Company and Wells Fargo Bank
Northwest, N.A.
10.2*- First Amendment to Deposit Trust Agreement dated October 14, 2005
among ASC Holdings, Inc. and Wilmington Trust Company.
10.3*- Second Amended and Restated Pledge Agreement dated October 14,
2005 among ASC Holdings, Inc. and Snake River Sugar Company.
10.4*- Second Pledge Agreement (SPT) dated October 14, 2005 among The
Amalgamated Collateral Trust and Snake River Sugar Company
10.5*- Second SPT Guaranty dated October 14, 2005 among The Amalgamated
Collateral Trust and Snake River Sugar Company.
10.6*- Option Agreement dated October 14, 2005 among Valhi, Inc., Snake
River Sugar Company, Northwest Farm Credit Services, FLCA and
U.S. Bank National Association.
10.7*- Amended and Restated Company Agreement of The Amalgamated Sugar
Company LLC dated October 14, 2005 among The Amalgamated Sugar
Company LLC, Snake River Sugar Company and The Amalgamated
Collateral Trust.
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* Filed herewith.
EXECUTION COPY
EXHIBIT 10.1
PREPAYMENT AND TERMINATION AGREEMENT
This Prepayment and Termination Agreement (this "Agreement") is dated as of
October 14, 2005 and is made by and between Valhi, Inc., a Delaware corporation
("Valhi"), Snake River Sugar Company, an Oregon cooperative corporation ("Snake
River") and Wells Fargo Bank Northwest, N.A. ("WFB", and formerly known as First
Security Bank, National Association).
PRELIMINARY STATEMENTS
A. Snake River and Valhi are parties to a Subordinated Loan Agreement dated
January 3, 1997, as amended and restated May 14, 1997, and as further
amended as of November 30, 1998 and October 19, 2000 (collectively, as so
amended, the "Subordinated Loan Agreement").
B. Snake River and Valhi are parties to a Contingent Subordinate Security
Agreement dated as of October 19, 2000 (the "Contingent Subordinate
Security Agreement").
C. Snake River and Valhi are parties to a Contingent Subordinate Pledge
Agreement dated as of October 19, 2000 (the "Contingent Subordinate Pledge
Agreement").
D. Snake River, Valhi and WFB are parties to a Contingent Subordinate
Collateral Agency and Paying Agency Agreement dated as of October 19, 2000
(the "Contingent Subordinate Collateral Agency and Paying Agency
Agreement").
E. Snake River made a interest payment to Valhi under the Subordinated Loan
Agreement on August 31, 2005 in the amount of $1,137,847.23, and Snake
River made additional interest payments to Valhi under the Subordinated
Loan Agreement on September 30, 2005 in the amounts of $1,963,541.67 and
$2,400,000.00.
F. Snake River is currently in compliance with all terms, provisions and
covenants to which it is subject under the Subordinated Loan Agreement.
G. Snake River desires to prepay an aggregate of $94,758,211.06 on October 18,
2005 owed to Valhi under the Subordinated Loan Agreement, using funds
generated from certain new senior indebtedness of Snake River (the "Senior
Notes") issued pursuant to the terms of a note purchase agreement (the
"Note Purchase Agreement") dated as of October 17, 2005, and Valhi desires
to accept such prepayment, in return for which Valhi is willing to
discharge Snake River's remaining obligations under the Subordinated Loan
Agreement, and certain other agreements related to the Subordinated Loan
Agreement would be terminated.
H. In connection with Snake River's issuance of the Senior Notes pursuant to
the Note Purchase Agreement, certain agreements to which certain of Valhi's
subsidiaries are a party will require amendment or restatement.
NOW THEREFORE, in consideration of the foregoing and upon the full and
complete satisfaction of the conditions precedent to the effectiveness of this
Agreement set forth in Section 5 hereof, and for other good and sufficient
consideration, the receipt of which is hereby acknowledged, the parties do
hereby agree as follows:
1. Definitions.
1.1. The terms "Subordinated Notes" and "Obligations" have the same meaning
as defined in the Subordinated Loan Agreement.
1.2. The term "Discharged Documents" means the Subordinated Loan Agreement,
the Subordinated Notes and any ancillary instruments, documents or
agreements related thereto.
1.3. The term "ASC" means ASC Holdings, Inc., a Utah corporation and an
indirectly, wholly-owned subsidiary of Valhi.
1.4. The term "Trust" means the Amalgamated Collateral Trust, a business
trust organized under the laws of the state of Delaware, whose sole
Certificate of Beneficial Interest is held by ASC.
2. Prepayment. Notwithstanding Section 8.1(g) or any other provision of the
Subordinated Loan Agreement, Valhi and Snake River agree that Snake River's
$94,758,211.06 prepayment under the Subordinated Loan Agreement will be
applied as follows: (i) first, $80 million will be applied to the
outstanding principal amount of the Subordinated Notes; and (ii) second,
$14,758,211.06 will be applied to accrued and unpaid interest owed on the
Obligations.
3. Discharge and Termination. After application of the $94,758,211.06
prepayment under the Subordinated Loan Agreement as described in Section 2
of this Agreement, Valhi and Snake River agree that (i) all remaining
Obligations of Snake River under the Discharged Documents, including
without limitation the remaining amount of accrued and unpaid interest owed
on the Obligations, shall be forgiven and discharged and the Obligations
and Discharged Documents shall be considered performed and satisfied; (ii)
Snake River shall be released from and owe no further Obligations to Valhi
under the Discharged Documents, and Snake River shall be fully released
from all Obligations under the Discharged Documents; and (iii) the
Discharged Documents shall be terminated.
4. Termination of Other Agreements. Concurrent with the termination of the
Discharged Documents as provided in Section 3 of this Agreement, each of
the Contingent Subordinate Security Agreement, the Contingent Subordinate
Pledge Agreement and the Contingent Subordinate Collateral Agency and
Paying Agency Agreement shall be terminated, and Snake River shall be
released from and have no further obligation or duty under each of the
Contingent Subordinate Security Agreement, the Contingent Subordinate
Pledge Agreement and the Contingent Subordinate Collateral Agency and
Paying Agency Agreement. Valhi agrees that all security interests granted
to it to secure the Obligations are hereby terminated, and Valhi authorizes
Snake River and WFB, as applicable, to take any action necessary to reflect
the termination of such security interests, including without limitation
the filing of UCC termination statements and the return of any collateral
held by Valhi or WFB.
5. Conditions Precedent. Each of the following shall be considered a condition
precedent to the effectiveness of this Agreement:
5.1. Snake River shall have made the $94,758,211.06 prepayment to Valhi
under the Subordinated Loan Agreement as provided for in Section 2
herein;
5.2. Valhi, Snake River and the purchasers of the Senior Notes shall have
entered into an agreement, on terms acceptable to Valhi, pursuant to
which Valhi would be granted an option to purchase all, and only all,
of the Senior Notes from the holders thererof;
5.3. The Company Agreement of The Amalgamated Sugar Company LLC, a limited
liability company organized pursuant to the Delaware Limited Liability
Company Act, as amended, shall be amended and restated on terms
acceptable to ASC.
5.4. The Deposit Trust Agreement relating to the Trust shall be amended on
terms acceptable to ASC.
5.5. The terms of a pledge agreement entered into between ASC and Snake
River shall be amended and restated on terms acceptable to ASC.
5.6. The terms of a pledge agreement entered into between the Trust and
Snake River shall be amended and restated on terms acceptable to ASC.
5.7. The terms of a guaranty issued by the Trust in favor of and for the
benefit of Snake River shall be amended and restated on terms
acceptable to ASC.
6. Representations and Warranties. Each party to this Agreement hereby
represents and warrants as follows:
6.1. Organization and Authority. Each party to this Agreement is an
organization duly and validly organized and existing and in good
standing under the laws of their respective states of incorporation,
and each party has the full power to enter into and perform its
obligations under this Agreement.
6.2. Authorization and Enforceability. The execution, delivery and
performance of this Agreement by each party are within their
respective powers and have been duly authorized by all necessary
action. This Agreement is the legally valid and binding agreement of
each party, enforceable against each party in accordance with its
terms.
6.3. No Violation or Conflict. The execution, delivery and performance of
this Agreement by each party does not and will not violate any law or
applicable organizational document of each party, or result in a
breach of the terms, conditions or provisions of, or constitute a
default under, any contract, agreement, instrument, order, judgment or
decree to which it is a party or by which it is bound, which
violation, conflict, breach or default would have a material adverse
effect on its ability to consummate the transactions contemplated
hereby.
7. Miscellaneous.
7.1. Governing Law. This Agreement, and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the
State of Idaho.
7.2. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
7.3. Severability. If any provision of this Agreement shall be declared
void or unenforceable by any court or administrative board of
competent jurisdiction, such provision shall be deemed to have been
severed from the remainder of this Agreement, and this Agreement shall
continue in all other respects to be valid and enforceable.
7.4. Enforceability and Validity. Each party hereto expressly agrees that
this Agreement shall be specifically enforceable in any court of
competent jurisdiction in accordance with its terms and against each
of the other parties hereto.
7.5. Successors and Assigns. All of the covenants and agreements contained
in this Agreement shall be binding upon, and inure to the benefit of,
the respective parties and their successor, assigns, heirs, executors,
administrators and other legal representatives, as the case may be.
7.6. Amendment and Wavier. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any
departure by any party therefrom, shall in any event be effective
unless the same shall be in writing and signed by the parties hereto.
Any such amendment, modification, termination, wavier or consent shall
be effective only in the specific instance and for the specific
purpose for which it is given.
7.7. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given
any substantive effect.
7.8. Further Documents. Each party agrees that it shall cooperate and
execute any other document or agreement reasonably necessary to carry
out the transactions contemplated by this Agreement.
[The remainder of this page is intentionally left blank]
IN WITNESS WHEREOF, Valhi, Snake River and WFB have each caused this
Agreement to be duly executed and delivered by the respective officers thereunto
duly authorized as of the date first written above.
SNAKE RIVER SUGAR COMPANY
By: /s/Dave Budge
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Dave Budge
Vice President
VALHI, INC.
By: /s/Gregory M. Swalwell
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Gregory M. Swalwell
Vice President
WELLS FARGO BANK NORTHWEST,
N. A.
By: /s/Brandon Mills
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Brandon Mills
Assistant Vice President
EXECUTION COPY
EXHIBIT 10.2
FIRST AMENDMENT TO DEPOSIT TRUST AGREEMENT
This First Amendment to Deposit Trust Agreement ("First Amendment")
relating to the Amalgamated Collateral Trust, dated as of October 14, 2005,
among ASC Holdings, Inc., a Utah Corporation (the "Depositor"), and Wilmington
Trust Company, a Delaware banking corporation (in its individual capacity,
"Wilmington"), and acknowledged by Snake River Sugar Company ("Secured Party"),
an Oregon cooperative, amends that certain Deposit Trust Agreement (the "Deposit
Trust Agreement") dated as of May 14, 1997 among Depositor, as a
Certificateholder and as the Company Trustee, and Wilmington, as Resident
Trustee. All references to this Deposit Trust Agreement shall mean the Deposit
Trust Agreement, as amended by the First Amendment. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Deposit Trust Agreement.
In consideration of the mutual agreements, covenants and representations
contained herein, the parties hereto agree as follows:
Section 1. DEFINITIONS.
1.1. The following capitalized terms contained in Section 1.1 of this
Deposit Trust Agreement are hereby amended in their entirety to read as follows:
"Collateral Agent" means Northwest Farm Credit Services, FLCA, in its capacity
as the agent for the purchasers of the Senior Notes issued pursuant to the Note
Purchase Agreement.
"Company Agreement" means the Amended and Restated Company Agreement of the LLC
dated as of October 14, 2005, as it may hereafter be amended, supplemented,
restated or otherwise modified from time to time.
"Effective Date" has the meaning stated in Section 3.2 of this Deposit Trust
Agreement.
"Note Purchase Agreement" means the Note Purchase Agreement dated as of October
17, 2005, among the Agent, Secured Party and the purchasers named therein,
pursuant to which the Secured Party issued its Senior Notes, as they may
hereafter be amended, supplemented, restated or otherwise modified from time to
time.
"Senior Notes" means the 7.61% Senior Notes due September 30, 2012 in the
original aggregate principal amount of $100 million, issued on October 17, 2005
by the Secured Party pursuant to the Note Purchase Agreement.
"Snake Pledge Agreement" means that certain Pledge and Security Agreement, dated
as of October 17, 2005 between the Secured Party and the Collateral Agent
pursuant to which the Secured Party has assigned to the Collateral Agent, for
the benefit of the holders of the Senior Notes, as collateral security for the
Secured Party's obligations under the Note Purchase Agreement, all of Secured
Party's rights, titles and interest in, to and under (i) this Deposit Trust
Agreement, (ii) the Snake River Loan Notes and (iii) the SPT Guaranty and all
collateral granted to the Secured Party in connection with the SPT Guaranty and
the Snake River Loan Notes, including, without limitation, the AGM Interest
pledged to the Secured Party pursuant to the SPT Pledge Agreement and rights to
certain distributions with respect thereto.
"SPT Guaranty" means the Second SPT Guaranty dated as of October 14, 2005 issued
by the Trust in favor of Secured Party, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
"SPT Pledge Agreement" means the Second Pledge Agreement (SPT) dated as of
October 14, 2005 between the Trust and Secured Party, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
"Valhi Entity Pledge Agreement" means the Second Amended and Restated Pledge
Agreement dated as of October 14, 2005 between Depositor and Secured Party.
1.2. The definitions of "Indemnification Pledge Agreement," "Voting Rights
Agreement" and "Voting Rights Notice" contained in Section 1.1 of this Deposit
Trust Agreement are each hereby deleted.
1.3. References to the term "Note Purchase Agreements" in this Deposit
Trust Agreement shall be deemed to be a reference to the Note Purchase
Agreement. Sction 2. AMENDMENTS.
2.1 Section 2.1(b). Section 2.1(b) of this Deposit Trust Agreement is
hereby amended in its entirety to read as follows:
"(b) The principal objects and purposes for which the Trust is created and
established are (i) owning, managing, holding, encumbering and otherwise dealing
with the Trust Property, (ii) issuing and selling the Certificates of Beneficial
Interest and executing, delivering and performing this Deposit Trust Agreement,
as amended by this First Amendment, (iii) executing and delivering the SPT
Guaranty, the SPT Pledge Agreement and the Company Agreement, and performing its
obligations thereunder, and (iv) engaging in any activities necessary,
convenient or incidental to the foregoing."
2.2 Section 2.4(a). Section 2.4(a) of this Deposit Trust Agreement is
hereby amended in its entirety to read as follows:
"(a) All cash amounts held or received by the Trust with respect to the
Trust Property shall be applied by the Resident Trustee on the applicable
Distribution Date in the following order:
(i) first, to the extent not otherwise paid, to pay all amounts (if
any) then due and payable to the Resident Trustee, pursuant to Sections 7.1 and
7.3 of this Deposit Trust Agreement;
(ii) second, either (A) before receipt by the Resident Trustee of the
Senior Note Payoff Notice, the Resident Trustee shall segregate an amount equal
to the aggregate amount due on the Senior Notes on the next day set for payment
thereof (whether it be principal, interest or otherwise), as specified from time
to time by the Collateral Agent in a notice to the Resident Trustee (provided,
however, that in no event shall the amount so segregated by the Resident Trustee
with respect to any applicable Distribution Date exceed the amount owed by Valhi
on the next day set for payment by Valhi under the Snake River Loan Notes), and
on the due date of such payment, pay such amount to the Collateral Agent (or
pursuant to payment instructions received by the Resident Trustee from the
Collateral Agent) or (B) after receipt by the Resident Trustee of the Senior
Note Payoff Notice, the Resident Trustee shall segregate an amount equal to
$1,963,541.67 (the monthly amount of interest due on the Snake River Loan
Notes), and on the last Business Day of such month pay such amount to the
Secured Party;
(iii) third, to the extent not otherwise paid, to pay all operating
and administrative expenses of the Trust for which the Resident Trustee has
received invoices;
(iv) fourth, if the Resident Trustee shall not have received a Snake
Loan Default Notice, all amounts remaining after payment (or segregation) of the
amounts set forth in clauses (i) through (iii) above plus all amounts of
interest on the amounts segregated under clause (ii) or otherwise received by
the Resident Trustee since the last distribution pursuant to this clause (iv),
to the Certificateholders on the same day when the Resident Trustee make the
actual payment under clause (ii) above; and
(v) fifth, if the Resident Trustee shall have received a Snake Loan
Default Notice, all amounts remaining after payment (or segregation) of the
amounts set forth in clauses (i) through (iv) above plus all amounts of interest
on the amounts segregated under clause (ii) or otherwise received by the
Resident Trustee since the last distribution pursuant to this clause (v) or
clause (iv), to the Collateral Agent (before the receipt by the Resident Trustee
of the Senior Note Payoff Notice) or to the Secured Party (after receipt by the
Resident Trustee of the Senior Note Payoff Notice).
Secured Party agrees and acknowledges that Valhi shall be given credit on
the next day set for payment by Valhi under the Snake River Loan Notes for any
amount segregated pursuant to clause (ii) above and not subsequently distributed
to the Certificateholders."
2.3 Section 2.6. Section 2.6 of this Deposit Trust Agreement is hereby
amended in its entirety to read as follows:
"Further Assurances. The Certificateholders (and, after the receipt by the
Resident Trustee of a Snake Loan Default Notice, the Collateral Agent, or, after
receipt by the Resident Trustee of a Senior Note Payoff Notice, the Secured
Party) may direct in writing a Trustee to execute and deliver, and such Trustee
shall execute and deliver, all such other instruments, documents or certificates
and take all such other actions as the Certificateholders or the Collateral
Agent or the Secured Party, as applicable, may deem necessary or advisable to
give effect to the transactions contemplated hereby, including, as applicable
and without limitation, transactions contemplated by the Company Agreement or
any of the Transaction Documents (as defined in the Note Purchase Agreement),
and the taking of any such action by a Trustee in the presence of (or upon the
written or oral request of (if such oral request is promptly confirmed in
writing)) a Certificateholder or the Collateral Agent or the Secured Party, as
applicable, or such person's counsel shall evidence, conclusively but not
exclusively, the direction of such Certificateholder or the Collateral Agent or
the Secured Party, as the case may be; provided, however, the Resident Trustee
shall not be required to take any such action if it shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in the Resident Trustee incurring personal liability or is contrary to
the terms hereof or of any document contemplated hereby to which the Trust or
the Resident Trustee is a party or is otherwise contrary to law."
2.4 Section 27. Section 2.7 of this Deposit Trust Agreement is hereby
amended in its entirety to read as follows:
"2.7 Duties of Trustees
(a) Notwithstanding anything to the contrary contained in this Section 2.7
or elsewhere in this Deposit Trust Agreement, the Company Trustee shall not have
any power or authority in respect of Section 2.4 or any power or authority to
take any other actions hereunder which impair the ability of the Trust to
receive payments in respect of the AGM Interest or to make the payments required
by Section 2.4.
(b) Subject to the limitations provided in the Company Agreement and in
Sections 2.7(a), 2.7(h) and 2.8 and otherwise in this Deposit Trust Agreement,
until receipt by the Resident Trustee of a Snake River Loan Default Notice, the
Company Trustee shall have full and exclusive power and authority to carry out
the purposes of the Trust. An action taken by the Company Trustee in accordance
with its powers shall constitute the act of and serve to bind the Trust; in
dealing with the Company Trustee acting on behalf of the Trust, no Person shall
be required to inquire into the authority of the Company Trustee and may rely
conclusively on the power and authority of the Company Trustee as set forth in
this Deposit Trust Agreement. Without limiting the generality of the foregoing,
and subject to any limitation contained in the Company Agreement, the Company
Trustee shall have full and exclusive power and authority:
(i) to manage and determine all of the business and affairs of the
Trust, including, without limitation, making all decisions, not inconsistent
with the terms of this Deposit Trust Agreement, with respect to Trust Property;
(ii) to incur expenses which the Company Trustee reasonably deems
necessary or incidental to carry out any of the purposes of this Deposit Trust
Agreement;
(iii) to execute all documents or instruments, perform all duties and
exercise all powers, and do all things for and on behalf of the Trust which the
Company Trustee deems necessary or incidental to the foregoing not inconsistent
with the terms hereof; and
(iv) to exercise all rights and actions with respect to the AGM
Interest held as part of the Trust Property.
(c) Subject to the limitations provided in Sections 2.7(a), 2.7(h) and 2.8,
and otherwise in this Deposit Trust Agreement, the Company Trustee is authorized
to execute on behalf of the Trust any documents which the Company Trustee has
the power and authority to cause the Trust to execute pursuant to Section
2.7(b). The Company Trustee may, by power of attorney consistent with applicable
law, delegate to any other Person its power for the purposes of signing any
documents which the Company Trustee has power and authority to execute pursuant
to this Deposit Trust Agreement.
(d) A Trustee shall not have any right, power, duty or obligation to take
or refrain from taking any action under or in connection with this Deposit Trust
Agreement, except as expressly required or permitted by the terms of this
Deposit Trust Agreement or as expressly directed in written instructions
pursuant to Sections 2.6, 2.7(e), 2.7(f) or 2.7(h) hereof, and no implied
powers, duties or obligations shall be read into this Deposit Trust Agreement
against or on the part of any Trustee. A Trustee shall not be required to take
any action if such Trustee shall reasonably determine, or shall have been
advised by counsel, that such action is likely to result in personal liability,
or is contrary to the terms hereof or of any document contemplated hereby to
which the Trust or the Trustee is party, or is otherwise contrary to law.
(e) No Trustee shall take any action contrary to (or fail to take any
action if such failure would be contrary to) this Deposit Trust Agreement, the
Snake Pledge Agreement, the SPT Guaranty, the SPT Pledge Agreement, the Valhi
Entity Pledge Agreement, the Company Agreement or any other document
contemplated hereby or thereby to which the Trust is party, which the Trustee
has Actual Knowledge (without any duty of inquiry), or has been advised by
counsel, is in contravention of this paragraph (e).
(f) Subject to the limitations provided in the Company Agreement and in
Sections 2.7(a), 2.7(h) and 2.8, and otherwise in this Deposit Trust Agreement,
the Resident Trustee will take such action or shall refrain from taking such
action under this Deposit Trust Agreement or any document to which the Trust is
a party as it shall be directed by the Company Trustee pursuant to an express
provision of this Deposit Trust Agreement, which instruction shall be delivered
by the Company Trustee in accordance with Section 8.4 hereof; provided that,
upon receipt by the Resident Trustee of a Snake Loan Default Notice, (A) the
Resident Trustee will take such action or shall refrain from taking such action
under this Deposit Trust Agreement or any document to which the Trust is a party
as it shall be directed by the Collateral Agent or Secured Party (if the Senior
Note Payoff Notice has been received by the Resident Trustee) pursuant to an
express provision of this Deposit Trust Agreement, which instruction shall be
delivered by the Collateral Agent or Secured Party (if the Senior Note Payoff
Notice has been received by the Resident Trustee) in accordance with Section 8.4
hereof and (B) notwithstanding anything to the contrary in this Deposit Trust
Agreement the Resident Trustee shall not take any direction with respect to this
Deposit Trust Agreement, the Trust or any document to which the Trust is a party
from the Depositor, any Certificateholder (other than the Collateral Agent) or
any other Person.
(g) If, in performing its duties under this Deposit Trust Agreement, or any
document to which it or the Trust is a party, the Resident Trustee determines
that it requires or desires guidance regarding the application of any provision
of this Deposit Trust Agreement or any such document, then the Resident Trustee
shall promptly deliver a notice to the Company Trustee and the Secured Party
(or, as applicable, if the Resident Trustee shall have received a Snake Loan
Default Notice, to the Collateral Agent and the Secured Party (if the Senior
Note Payoff Notice has not been received by the Resident Trustee) or to the
Secured Party (if the Senior Note Payoff Notice has been received by the
Resident Trustee) in accordance with Section 8.4 hereof requesting written
instructions as to the course of action required by the Company Trustee, the
Collateral Agent or Secured Party, as applicable, and any action taken by the
Resident Trustee in reliance on such instruction shall be full and complete
authorization and protection.
(h) Prior to the time that the Resident Trustee shall have received a Snake
Loan Default Notice, the Company Trustee shall make any determination or
decision required pursuant to this Section 2.7, or, as applicable, at any time
after the Resident Trustee shall have received a Snake Loan Default Notice,
either the Collateral Agent (if the Senior Note Payoff Notice has not been
received by the Resident Trustee) or the Secured Party (if the Senior Note
Payoff Notice has been received by the Resident Trustee) shall make any
determination or decision required pursuant to this Section 2.7, as reflected in
instructions to the Resident Trustee delivered in accordance with Section 8.4
hereof. If the Resident Trustee does not receive such instructions within 10
Business Days after it has delivered notice pursuant to Section 2.7(g) and in
accordance with Section 8.4, or such shorter period of time set forth in such
notice, it shall refrain from taking any action with respect to the matters
described in such notice.
(i) The Resident Trustee shall furnish to the Certificateholders, the
Collateral Agent and the Secured Party, promptly upon receipt thereof, a
duplicate or copy of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Resident Trustee
and relating to the Trust, this Deposit Trust Agreement or the other parties
hereto; provided that the Resident Trustee need not forward documents to such
Person if such Person originated the documents or furnished them to the Resident
Trustee or is to receive any such documents from any Person other than the
Resident Trustee according to an express provision hereof or under any document
to which the Trust is a party.
(j) Notwithstanding anything to the contrary contained in this Deposit
Trust Agreement, the Resident Trustee shall not be required to take any such
action if it shall have reasonably determined, or shall have been advised by
counsel, that such action is likely to result in the Resident Trustee incurring
personal liability or is contrary to the terms hereof or of any document
contemplated hereby to which the Trust or the Resident Trustee is a party or is
otherwise contrary to law. None of the Certificateholders, the Collateral Agent
or Secured Party or the Company Trustee shall direct the Resident Trustee to
take or refrain from taking any action contrary to this Deposit Trust Agreement,
or any document contemplated hereby to which the Trust is a party, nor shall the
Resident Trustee be obligated to follow any such direction, if given, which the
Resident Trustee has Actual Knowledge (without any duty of inquiry), or has been
advised by counsel, is in contravention of this paragraph (j)."
2.5 Section 3.1. Section 3.1 of this Deposit Trust Agreement is hereby
amended to add a new subsection (c) to read as follows:
"(c) Notwithstanding any provision in this Deposit Trust Agreement to the
contrary, and in addition to certain documents which the Company Trustee has
previously been authorized or directed to execute, the Company Trustee is hereby
authorized and directed, without the consent or approval of or other action by
any Person, to (i) execute and deliver on behalf of the Trust, the Amended and
Restated Company Agreement of the LLC dated as of October 14, 2005, the SPT
Guaranty dated as of October 14, 2005 and the SPT Pledge Agreement dated as of
October 14, 2005 and any UCC-1 financing statements requested by the Collateral
Agent and (ii) perform all such agreements and the Company Agreement."
2.6 Section 3.2(a). Section 3.2(a) of this Deposit Trust Agreement is
hereby amended in its entirety to read as follows:
"(a) Effective as of October 14, 2005 (the "Effective Date"), the Trust
hereby confirms that it has granted to the Secured Party a first priority
security interest in the Pledged Collateral (as defined in the SPT Pledge
Agreement) as provided in the SPT Pledge Agreement. The Trust acknowledges and
consents to the assignment by the Secured Party to the Collateral Agent of all
of the Secured Party's rights under the SPT Pledge Agreement, including all
rights in and to such Pledged Collateral."
2.7. Section 7.1. A new clause (h) is hereby added to Section 7.1 of this
Deposit Trust Agreement to read as follows:
"(h) Notwithstanding anything to the contrary contained in this Section
7.1, with respect to, under, or in connection with any agreement, document or
instrument related to or contemplated by this Deposit Trust Agreement and which
the Company Trustee has executed and delivered in its individual capacity and
not in its capacity as Company Trustee, the Company Trustee shall remain liable
in its individual capacity to the other party or parties to any such agreement,
document or instrument, in each case in accordance with the terms thereof, and
the Company Trustee shall not be protected against any liability to Secured
Party or Collateral Agent for which the Company Trustee would otherwise be
subject by reason of the Company Trustee's bad faith, willful misconduct or
gross negligence."
2.8 Section 8.12. Section 8.12 of this Deposit Trust Agreement is hereby
amended in its entirety to read as follows:
"8.12. Operations of the Trust. The Company Trustee will, and will cause
the Trust to, at all times, (i) keep all records of the Trust in a form separate
from the records of the Depositor, (ii) prepare and maintain, separate from the
Depositor, all financial statements, accounting records and tax documents
required of a Delaware statutory trust, (iii) keep the Trust's administrative
activities separate from the Depositor's (including using stationery that does
not resemble that of the Depositor), (iv) maintain bank accounts of the Trust in
the name of the Trust, and separate in all respects from those of the Depositor
and (v) otherwise maintain, to the extent necessary, the separate, distinct and
independent legal existence of the Trust under the Business Trust Statute from
the separate, distinct and independent legal existence of each of the Depositor
and the Company Trustee in order to prevent any applicable court involving
Federal or state bankruptcy, insolvency, reorganization or similar law from
disregarding such separate, distinct and independent legal existence of the
Trust or substantively consolidating the assets and liabilities of the Trust
with the assets and liabilities of the Depositor or the Company Trustee if the
Depositor or the Company Trustee become subject to the jurisdiction of any such
court. Furthermore, if the Depositor and the Company Trustee become subject to
the jurisdiction of any applicable court involving Federal or state bankruptcy,
insolvency, reorganization or similar law, the Resident Trustee will, and will
cause the Trust to, at all times, continue to segregate and distribute all cash
amounts held or received by the Trust with respect to the Trust Property
pursuant to the provisions of Section 2.4 of this Deposit Trust Agreement,
provided, however, that the Resident Trustee shall have no duty or obligation to
take such action, nor any liability for or in respect of such action or
inaction, as the case may be, to the extent the Resident Trustee shall have
become prevented from doing so pursuant to a final order of any such court or to
the extent the Resident Trustee is otherwise permitted to refrain from taking
such action pursuant to the provisions of this Deposit Trust Agreement,
including without limitation the provisions of Section 2.7(j) herein."
Section 3. REPRESENTATIONS AND WARRANTIES OF ASC. ASC, in its capacity as the
Depositor and as the Company Trustee, represents and warrants that:
(a) ASC is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, is duly qualified
as a foreign corporation and is in good standing in all additional jurisdictions
where such qualification is necessary under applicable law, and has the
corporate power and authority to own the properties it purports to own and to
execute and deliver this First Amendment and to perform the provisions hereof.
(b) The execution and delivery of this First Amendment by ASC and the
performance by ASC of its obligations under this First Amendment does not and
will not (i) contravene, result in any breach of, or constitute a default under,
or result in the creation of any Lien in respect of any of the Trust Property
under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which it is bound or by which ASC or the Trust Property may be
bound or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or governmental authority applicable to ASC or the Trust Property or
(iii) violate any provision of any statute or other rule or regulation of any
governmental authority applicable to ASC or the Trust Property.
(c) Except as have been obtained, no consent, approval or authorization of,
or registration, filing or declaration with, any governmental authority or any
nongovernmental Person or entity, including, without limitation, any creditor,
lessor or stockholder, is required in connection with the execution, delivery or
performance by ASC of this Deposit Trust Agreement or the transactions
contemplated hereby or as a condition to the legality, validity or
enforceability of this Deposit Trust Agreement.
(d) This First Amendment has been duly authorized by all necessary
corporate action on the part of ASC, and this Deposit Trust Agreement is the
legal, valid and binding obligation of ASC, enforceable against it in accordance
with its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditor's rights generally, or general
principles of equity.
(e) There are no actions, suits or proceedings (including, without
limitation, arbitration and administrative proceedings) pending or, to the
knowledge of ASC or any officer of ASC, threatened against or affecting ASC or
the Trust Property in any court or before any arbitrator of any kind or before
or by any governmental authority that, individually or in the aggregate, if
determined adversely to ASC, could materially and adversely affect the ability
of ASC to perform its obligations under this Deposit Trust Agreement, and, to
the best knowledge of ASC or any officer of ASC, there is no basis for any such
action, suit or proceeding.
(f) ASC is not in default under any term of any agreement or instrument to
which it is a party or by which it or the Trust Property is bound, or any order,
judgment, decree or ruling of any court, arbitrator or governmental authority or
is in violation of any applicable law, ordinance, rule or regulation of any
governmental authority which violation or default, individually or in the
aggregate, could materially and adversely affect the ability of ASC to perform
its obligations under this Deposit Trust Agreement.
Section 4 REPRESENTATIONS AND WARRANTIES OF WILMINGTON. Wilmington, in its
capacity as the Resident Trustee, represents and warrants that:
(a) Wilmington is a banking corporation organized under the laws of the
State of Delaware, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all material governmental
licenses, authorization, consents and approvals required under the laws of the
State of Delaware to carry on its trust business as now conducted.
(b) The execution, delivery and performance by Wilmington, in its capacity
as Resident Trustee, of this First Amendment is within the corporate power of
Wilmington, have been duly authorized by all necessary corporate action on the
part of Wilmington (no action by its shareholders being required) and do not and
will not (i) violate or contravene any judgment, injunction, order or decree
binding on Wilmington or (ii) violate, contravene or constitute a default under
any provision of the certificate of incorporation or by-laws of Wilmington or of
any material agreement, contract, mortgage or other instrument binding on
Wilmington or (iii) result in the creation or imposition of any lien on the
Trust Property, attributable to Wilmington which is not related to the
administration of the Trust or the transactions pursuant to this First Amendment
or contemplated by this First Amendment.
Section 5 MISCELLANEOUS.
Section 5.1. SEVERABILITY. If any one or more of the covenants, agreements,
provisions or terms of this First Amendment shall be held invalid for any reason
whatsoever, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
First Amendment and shall in no way affect the validity or enforceability of the
other provisions of this First Amendment or of the Certificates of Beneficial
Interest or the rights of the Trustees or Certificateholders or of the Secured
Party or of the Collateral Agent.
Section 5.2. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD
TO ANY CONFLICTS OF LAW RULES), AND ALL LAWS OR RULES OF CONSTRUCTION OF SUCH
STATE SHALL GOVERN THE RIGHTS OF THE PARTIES TO THIS FIRST AMENDMENT AND THE
INTERPRETATION OF THE PROVISIONS OF THIS FIRST AMENDMENT.
Section 5.3. COUNTERPARTS. This First Amendment may be executed and
delivered in any number of counterparts, and such counterparts taken together
shall constitute one and the same instrument.
Section 5.4. HEADINGS. Section and subsection headings in this First
Amendment are included herein for convenience of reference only and shall not
constitute a part of this First Amendment for any other purpose or be given any
substantive effect.
Section 5.5. CONCERNING THE RESIDENT TRUSTEE.
(a) The Company Trustee hereby authorizes, empowers and directs the
Resident Trustee to execute and deliver this First Amendment and any and all
documents and/or instruments as may be necessary, desirable or convenient in
connection with, incidential to, or contemplated by this First Amendment. The
Company Trustee hereby certifies and confirms (i) that it is the sole
Certificateholder under the Deposit Trust Agreement, and (ii) that the foregoing
authorization and direction and the execution and delivery of such documents are
required or permitted under the Deposit Trust Agreement, are not contrary to the
terms of the Deposit Trust Agreement or of any document contemplated by the
Deposit Trust Agreement to which the Trust or the Resident Trustee is a party,
or is otherwise contrary to law, and are covered by the indemnification provided
under the Deposit Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this First
Amendment has been executed by Wilmington Trust Company not in its individual
capacity but solely in its capacity as Resident Trustee and in no event shall
Wilmington Trust Company in its individual capacity or as Resident Trustee have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Trust or any other Person hereunder or other documents
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the Trust. For all purposes of this First Amendment, in the
performance of any duties or obligations of the Resident Trustee hereunder, the
Resident Trustee shall be entitled to the benefits of the terms and provisions
of the Deposit Trust Agreement.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed and delivered as of the date first above written.
ASC HOLDINGS, INC., as Depositor and Company Trustee
By: /s/Gregory M. Swalwell
--------------------------------------------------
Gregory M. Swalwell
Vice President
WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Resident
Trustee
By: /s/Charrise Rodgers
--------------------------------------------------
Charrise Rodgers
Vice President
ACKNOWLEDGED BY:
SNAKE RIVER SUGAR COMPANY, as Secured Party
By: /s/Dave Budge
---------------------------------------------------
Dave Budge
Vice President
NORTHWEST FARM CREDIT SERVICES, FLCA, as Collateral Agent
By: /s/Jack Hetherington
---------------------------------------------------
Jack Hetherington
Vice President
EXECUTION COPY
EXHIBIT 10.3
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT
THIS SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (this "AGREEMENT") is
entered into as of October 14, 2005, between SNAKE RIVER SUGAR COMPANY, an
Oregon cooperative (the "COMPANY"), as secured party, and ASC HOLDINGS, INC., a
Utah corporation ("ASC"; formerly known as The Amalgamated Sugar Company), as
debtor.
WHEREAS, pursuant to a Pledge Agreement and a Limited Recourse Pledge
Agreement, each dated January 3, 1997 and each between the Company and ASC
(collectively, the "ORIGINAL PLEDGE AGREEMENTS"), ASC granted to the Company a
security interest in the limited liability company interest (the "AGM INTEREST")
held by ASC in The Amalgamated Sugar Company LLC, a Delaware limited liability
company (the "LLC");
WHEREAS, ASC granted such security interest in order to secure the
obligations of Valhi, Inc. ("VALHI"), the indirect holder of 100% of ASC's
outstanding stock under (i) that certain Subordinated Promissory Note dated
January 3, 1997, in aggregate principal amount of $37,500,000, issued by Valhi
to the Company (the "SUBORDINATED PROMISSORY NOTE") and (ii) that certain
Limited Recourse Promissory Note dated January 3, 1997, in aggregate principal
amount of $212,500,000, issued by Valhi to the Company (the "LIMITED RECOURSE
PROMISSORY NOTE," and together with the Subordinated Promissory Note, the "SNAKE
RIVER LOAN NOTES");
WHEREAS, pursuant to a Deposit Trust Agreement (the "DEPOSIT TRUST
AGREEMENT"), dated as of May 14, 1997, as the same may be amended, supplemented
or otherwise modified from time to time, between ASC and Wilmington Trust
Company, a Delaware banking corporation, as Resident Trustee, ASC transferred
its interest in the AGM Interest to the Amalgamated Collateral Trust (the
"TRUST"), in exchange for a 100% Certificate of Beneficial Interest issued by
the Trust (the "CERTIFICATE");
WHEREAS, in connection with the transfer of the AGM Interest by ASC to the
Trust in exchange for the issuance of the Certificate by the Trust to ASC, ASC
and the Company amended and restated the Original Pledge Agreements in their
entirety and combined them into the Amended and Restated Pledge Agreement dated
as of May 14, 1997 (the "FIRST AMENDED AND RESTATED PLEDGE AGREEMENT"), in order
to (i) reflect the change of the name of ASC from The Amalgamated Sugar Company
to ASC Holdings, Inc., (ii) acknowledge the transfer of the Collateral (as
defined in the Original Pledge Agreements) to the Trust, (iii) acknowledge that
the security interest in the AGM Interest granted by the Trust pursuant to that
certain Pledge Agreement (SPT) dated as of May 14, 1997 ("ORIGINAL PLEDGE
AGREEMENT (SPT)") replaced and superseded the security interest in the AGM
Interest granted by the Existing Pledge Agreements, and (iv) grant to the
Company a security interest in ASC's interest in the Certificate; and
WHEREAS, ASC and the Company desire to amend and restate the First Amended
and Restated Pledge Agreement in its entirety, as reflected herein, and
therefore this Agreement shall supersede the First Amended and Restated Pledge
Agreement in order to (i) acknowledge that the security interest in the AGM
Interest granted by the Trust pursuant to the Second Pledge Agreement (SPT)
dated as of October 14, 2005 has replaced and superseded the security interest
in the AGM Interest granted by the Trust pursuant to the Original Pledge
Agreement (SPT) and (ii) continue to grant to the Company a security interest in
ASC's interest in the Certificate.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto hereby agree as follows:
1. Pledge. For value received, ASC grants to the Company a security
interest (the "SECURITY INTEREST") in (i) the Certificate and the beneficial
interest of ASC in the Trust, (ii) following a Snake Loan Default (as defined
below), all dividends, distributions and cash from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Certificate and/or the beneficial interest in the Trust and (iii) any
other interest of ASC in or relating to the AGM Interest (and following a Snake
Loan Default, all proceeds thereof) (the "COLLATERAL"). The Security Interest is
created to secure all obligations and indebtedness arising pursuant to the Snake
River Loan Notes and all other agreements or instruments entered into in
connection therewith (the "OBLIGATIONS"). Except as provided below, the
Collateral includes all rights to receive future distributions, increases,
substitutions, accessions, voting rights or other property or benefits which ASC
receives or is entitled to receive or exercise on account of the Collateral. The
Collateral shall not include and the Security Interest shall terminate and be
automatically released with respect to (i) rights to Retained Amounts (as
defined in the Amended and Restated Company Agreement of the Amalgamated Sugar
Company LLC dated as of October 14, 2005 (the "COMPANY AGREEMENT OF LLC"), as
the same may be amended, supplemented or otherwise modified from time to time),
accrued prior to a Snake Loan Default and actually paid or distributed to ASC by
the Resident Trustee (as defined in the Deposit Trust Agreement) of the Trust
pursuant to the terms of the Deposit Trust Agreement prior to a Snake Loan
Default and (ii) any other cash distributions on account of the Collateral
actually paid or distributed to ASC by the Resident Trustee of the Trust
pursuant to the Deposit Trust Agreement prior to a Snake Loan Default. The
Company shall not encumber or dispose, or attempt to encumber or dispose, of the
Collateral except in accordance with the provisions of this Agreement. The term
"SNAKE LOAN DEFAULT" means any default under the Snake River Loan Notes
permitting or resulting in acceleration of the Snake River Loan Notes.
Notwithstanding anything else contained in this Agreement, ASC agrees and
acknowledges that the terms of the Deposit Trust Agreement require the Resident
Trustee to segregate certain distributions and other amounts received by the
Trust which were paid by the LLC in respect of the AGM Interest held by the
Trust (the "DESIGNATED DISTRIBUTIONS"), including without limitation any
distribution paid by the LLC in respect of Retained Amounts, and that such
Designated Distributions are to be paid, on behalf of the Company, to the Agent
(as defined below) for the Senior Notes (as defined below) for the benefit of
the holders of such Senior Notes, regardless of whether or not a Snake Loan
Default or any acceleration of the Snake River Loan Notes has occurred or
exists.
I 2. Voting and Other Rights. During the term of this Agreement, and
subject to any limitation contained in the Company Agreement of LLC or the
Deposit Trust Agreement, each as amended or restated through the date of this
Agreement, so long as the maturity dates of the Snake River Loan Notes have not
been accelerated as provided therein, ASC shall have the right to vote the
Collateral on all questions. Following acceleration of the maturity date of the
Subordinated Promissory Note or the Limited Recourse Promissory Note pursuant to
Section 7 or Section 6 thereof, respectively, ASC's right to vote the Collateral
shall terminate (provided that in the case of a partial acceleration of either
Snake River Loan Note, ASC's right to vote the Collateral shall terminate only
with respect to a portion of the Collateral equal to the portion of the Snake
River Loan Note(s) so accelerated).
3. Representations. ASC warrants and represents (i) that there are no
restrictions on the transfer of any of the Collateral, other than as set forth
in the Deposit Trust Agreement, and (ii) this Agreement constitutes the valid
and legally binding obligation of ASC, enforceable in accordance with its terms
and conditions, as enforceability may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditor rights generally, and subject to general principles of equity and
public policy considerations. ASC shall, at the request of the Agent, promptly
deliver all reasonable further instruments and documents, and take all
reasonable further actions, in order to perfect the Security Interest granted
herein and to otherwise give effect to the provisions of this Agreement. ASC
shall not grant any security interest in the Collateral, other than pursuant to
(i) liens for taxes, assessments or other governmental charges not yet due and
payable, (ii) statutory liens of landlords, carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law which are incurred in the
ordinary course of business for sums not more than thirty (30) days delinquent
and (iii) liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money). ASC expects to derive benefit, directly or indirectly, from the funds
advanced to Valhi by Snake River in exchange for the Snake River Loan Notes
because, among other reasons, (a) ASC, as an indirectly, wholly-owned subsidiary
of Valhi, may from time to time receive capital contributions from Valhi to
support its operations, and (b) Valhi has centralized certain management,
financial, accounting, administrative, income tax, legal and risk management
functions in one central office, and Valhi directly and indirectly provides such
services to ASC, from which ASC derives benefit.
4. Adjustments. In the event that, during the term of this Agreement, any
reclassification, readjustment or other change is declared or made in the
capital structure of the issuer of the Collateral, all new, substituted and
additional interests or securities issued in respect of the Collateral by reason
of any such change shall be delivered to the Agent and held by it under the
terms of this Agreement in the same manner as the Collateral originally pledged
hereunder.
5. Payment of the Snake River Loan Notes. Upon payment of all principal of
and other amounts due on the Snake River Loan Notes, the Security Interest shall
be canceled and the Company and the Agent shall convey to ASC all certificates,
documents and other instruments representing the Collateral.
6. Rights of the Agent. ASC hereby appoints the Agent as ASC's
attorney-in-fact to do any act which ASC is obligated by this Agreement to do
and to do all things deemed necessary by the Agent (or the Company, after
payment in full in cash of the Senior Notes (as defined below)) to perfect the
Security Interest and collect, preserve and enforce the Collateral, all at ASC's
cost and without any obligation on the Agent or the Company so to act.
7. Default. If, pursuant to the terms and provisions of the Subordinated
Promissory Note or the Limited Recourse Promissory Note, the maturity date
thereof has been accelerated pursuant to Section 7 or Section 6 thereof,
respectively, the Agent may proceed to enforce payment of such Snake River Loan
Note or any part thereof and to exercise any and all rights and remedies in
connection with the Collateral provided by the Uniform Commercial Code in force
in the state of any applicable jurisdiction (the "CODE"), whether or not the
Code applies to the affected Collateral, as well as other rights and remedies in
connection with the Collateral possessed by the Agent (or the Company, after
payment in full in cash of the Senior Notes (as defined below)) under this
Agreement. For purposes of the notice requirements of the Code, the Company and
ASC agree that notice given at least five (5) business days prior to the taking
of any action with respect to which notice is required is reasonable. Except as
otherwise provided, all rights and remedies of the Company and Agent hereunder
are cumulative and may be exercised singly or concurrently, and the exercise of
any right or remedy shall not be a waiver of any other. Notwithstanding anything
in this Agreement to the contrary, ASC shall not be liable to the Company or the
Agent for any deficiency or other amount constituting the Obligations which the
Company or the Agent does not recover or obtain from the Collateral, except to
the extent of any funds distributed to ASC by the Resident Trustee of the Trust
in violation of the terms and provisions of this Agreement, the Deposit Trust
Agreement or the Company Agreement of LLC, as such Deposit Trust Agreement and
Company Agreement of LLC have been amended or restated as of the date of this
Agreement. If the amount received by the Company or the Agent upon sale of the
Collateral is less than the amount of the Obligations, neither the Company nor
the Agent shall have further recourse to any assets or property of ASC.
8. Acknowledgment. ASC hereby acknowledges and agrees that the Company will
assign and grant a security interest in all of the Company's rights in, to and
under this Agreement and the Collateral to Northwest Farm Credit Services, FLCA,
as agent (the " AGENT") for the benefit of the holders of the 7.61% Senior Notes
due September 30, 2012 (the "SENIOR NOTES") issued by the Company pursuant to
the Note Purchase Agreement, each dated October 17, 2005, among the Company, the
Agent and the purchasers referred to therein (the "NOTE PURCHASE AGREEMENT"), as
the same may be amended, supplemented or otherwise modified from time to time,
as security for the Company's obligations under the Senior Notes and the Note
Purchase Agreement, and thereafter the Agent shall have all of the rights
granted to the Company hereunder. So long as the Agent has any security interest
in this Agreement or the Collateral, the term "Company" shall include the Agent
for all purposes under this Agreement. The Certificate and all other
certificates and other instruments which may constitute the Collateral shall be
endorsed in blank for transfer, or be accompanied by proper instruments of
assignment and transfer properly endorsed in blank, and delivered to the Agent.
After the payment in full in cash of the Senior Notes, all references herein to
the Agent shall be deemed references to the Company.
9. Miscellaneous.
(A) Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, receivers, trustees and
assigns where permitted by this Agreement.
(B) Governing Law. This Agreement shall be construed in accordance
with the Code and other applicable laws of the State of Washington.
(C) Modification. This Agreement shall not be amended in any way
except by a written agreement signed by the parties hereto.
(D) Severability. The unenforceability of any provision of this
Agreement shall not affect the enforceability or validity of any other provision
hereof.
(E) Notice. Any notice required to be given under this Agreement or
under the Code shall be personally delivered (including by overnight courier
service) or deposited with the United States Postal Service, postage prepaid,
certified with return receipt requested and addressed as follows:
If to the Company:
Snake River Sugar Company
3184 Elder Street
Boise, Idaho, 83705
Attn: General Counsel
with a copy to:
Northwest Farm Credit Services, FLCA
1700 South Assembly Street
Spokane, Washington 99224
Attn: Mr. Stacy Lavin
and a copy to:
Northwest Farm Credit Services, FLCA
815 North College Road
Twin Falls, Idaho 83303
Attn: Mr. Jack Hetherington
If to ASC:
ASC Holdings, Inc.
Three Lincoln Centre
Suite 1700
5430 LBJ Freeway
Dallas, Texas 75240
Attn: General Counsel
Any party hereto may change the address to which notices to such party are
required to be sent by giving notice of such change in the manner provided in
this Section 9E. All notices will be deemed to have been received on the date of
personal delivery or on the third business day after mailing in accordance with
this Section 9E, except that any notice of a change of address will be effective
only upon actual receipt.
(F) Waiver of ASC. ASC hereby waives presentment, demand, notice of
dishonor, protest, notice of protest and all other notices with respect to
collection of the Collateral and the Snake River Loan Notes.
[Remainder of page left blank]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
ASC HOLDINGS, INC.
By: /s/Gregory M. Swalwell
-------------------------------------------------------------
Gregory M. Swalwell
Vice President
SNAKE RIVER SUGAR COMPANY
By: /s/Dave Budge
-------------------------------------------------------------
Dave Budge
Vice President
EXECUTION COPY
EXHIBIT 10.4
SECOND PLEDGE AGREEMENT (SPT)
This SECOND PLEDGE AGREEMENT (this "AGREEMENT") is dated as of October 14,
2005 and entered into by and between AMALGAMATED COLLATERAL TRUST, a Delaware
business trust ("PLEDGOR"), and SNAKE RIVER SUGAR COMPANY, an Oregon cooperative
("SECURED PARTY").
WHEREAS, Pledgor is the legal and beneficial owner of the limited liability
company membership interest (the "PLEDGED EQUITY") described in Schedule I
annexed hereto and issued by The Amalgamated Sugar Company LLC, a Delaware
limited liability company ("LLC").
WHEREAS, Valhi, Inc. ("VALHI"), a Delaware corporation and the indirect
holder of 100% of the outstanding stock of ASC Holdings, Inc. ("ASC"), a Utah
corporation and the sole owner of the Certificate of Beneficial Interest issued
by Pledgor, has issued to Secured Party a Limited Recourse Promissory Note dated
January 3, 1997 in aggregate principal amount of $212,500,000 (as it may
hereafter be amended, supplemented or otherwise modified from time to time, the
"LIMITED RECOURSE PROMISSORY NOTE") and a Subordinated Promissory Note dated
January 3, 1997 in aggregate principal amount of $37,500,000 (as it may
hereafter be amended, supplemented or otherwise modified from time to time, the
"SUBORDINATED PROMISSORY NOTE", and, together with the Limited Recourse
Promissory Notes, the "NOTES").
WHEREAS, Pledgor entered into a Guaranty (the "ORIGINAL SPT GUARANTY"),
dated May 14, 1997, in favor of Secured Party, pursuant to which Pledgor
guaranteed the obligations of Valhi under the Limited Recourse Promissory Note
and in certain circumstances the obligations of Valhi under the Subordinated
Promissory Note.
WHEREAS, Pledgor granted to Secured Party a security interest, pursuant to
the Pledge Agreement (SPT) dated as of May 14, 1997 (the "ORIGINAL PLEDGE
AGREEMENT (SPT)"), in all of Pledgor's right, title and interest in the Pledged
Equity.
WHEREAS, Pledgor has amended and restated the Original SPT Guaranty
pursuant to the Second SPT Guaranty dated as of October 14, 2005 (the "SECOND
SPT GUARANTY") in favor of Secured Party, pursuant to which Pledgor has
continued to guarantee the obligations of Valhi under the Limited Recourse
Promissory Note and in certain circumstances the obligations of Valhi under the
Subordinated Promissory Note.
WHEREAS, Pledgor and Secured Party desire to amend and restate the Original
Pledge Agreement (SPT), as reflected herein, and therefore this Agreement shall
supersede the Original Pledge Agreement (SPT).
WHEREAS, Pursuant to a Pledge and Security Agreement (the "SENIOR PLEDGE
AGREEMENT") dated as of October 17, 2005 between Secured Party and Northwest
Farm Credit Services, FLCA, as agent (the "AGENT") for the benefit of the
purchasers named in the Note Purchase Agreement (as defined below), Secured
Party has pledged and assigned to Agent, and granted to Agent a security
interest in, all of Secured Party's right, title and interest in and to the
Notes and all collateral related thereto including its interest created
hereunder in the Pledged Equity.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with Secured Party as follows:
Section 1. CERTAIN DEFINITIONS. The following terms used in this Agreement
shall have the following meanings:
"CERTIFICATE OF BENEFICIAL INTEREST" means the Certificate of Beneficial
Interest as defined in the Deposit Trust Agreement.
"COMPANY AGREEMENT" means the Amended and Restated Company Agreement of the
Amalgamated Sugar Company LLC dated October 14, 2005, as the same may be
amended, supplemented or otherwise modified from time to time.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"DEPOSIT TRUST AGREEMENT" means the Deposit Trust Agreement of Amalgamated
Collateral Trust, dated as of May 14, 1997, between ASC and Wilmington Trust
Company, as it may be amended, supplemented or otherwise modified from time to
time.
"EVENT OF DEFAULT" means a default under either of the Notes entitling
Secured Party to accelerate payment on the Notes.
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, limited liability companies, cooperatives or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"RESIDENT TRUSTEE" means the Resident Trustee as defined in the Deposit
Trust Agreement.
"COMPANY TRUSTEE" means the Company Trustee as defined in the Deposit Trust
Agreement.
Section 2. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Equity and any certificates representing the Pledged Equity
and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Equity, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Equity;
(b) all additional equity interests, and all securities convertible into
and warrants, options and other rights to purchase or otherwise acquire any
equity interests, in any issuer of the Pledged Equity from time to time acquired
by Pledgor in any manner (which interests shall be deemed to be part of the
Pledged Equity), any certificates or other instruments representing such
additional equity interests, securities, warrants, options or other rights and
any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to such additional equity interests, and all dividends,
cash, warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such additional equity interests, securities, warrants,
options or other rights; and
(c) to the extent not covered by clauses (a) and (b) above, all proceeds of
any or all of the foregoing Pledged Collateral. For purposes of this Agreement,
the term "PROCEEDS" includes whatever is receivable or received when Pledged
Collateral or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, proceeds of any indemnity or guaranty payable to Pledgor or Secured
Party from time to time with respect to any of the Pledged Collateral.
(d) Notwithstanding anything in this Agreement to the contrary but subject
to the limitation contained in Section 2(e) of this Agreement, the Pledged
Collateral shall not include, and Secured Party shall not have a security
interest in (and Secured Party's security interest shall terminate and
automatically be released with respect to) any cash distributions on account of
the Pledged Collateral actually paid or distributed by the Resident Trustee
prior to the date of any Event of Default on the Notes to holder of the
Certificate of Beneficial Interest in accordance with the terms of the Deposit
Trust Agreement, including without limitation any Retained Amounts (as defined
in the Company Agreement) actually paid or distributed to the holder of the
Certificate of Beneficial Interest prior to an Event of Default.
(e) Notwithstanding anything else contained in this Agreement, Pledgor
agrees and acknowledges that the terms of the Deposit Trust Agreement require
the Resident Trustee to segregate certain distributions and other amounts
received by Pledgor which were paid by the LLC in respect of the Pledged
Collateral (the "DESIGNATED DISTRIBUTIONS"), and that such Designated
Distributions are to be paid, on behalf of Secured Party, to the Agent for the
Senior Notes (as defined below) for the benefit of the holders of such Senior
Notes, regardless of whether or not an Event of Default on the Notes or any
acceleration of the Notes has occurred or exists. The parties hereto hereby
acknowledge and agree that Pledgor will direct LLC and any other applicable
party, as the case may be, to make all payments of distributions and any other
amounts in respect of any of the Pledged Collateral directly to the Resident
Trustee (or as otherwise instructed by the Resident Trustee).
(f) Subject to any limitation contained in the Company Agreement on the
exercise of the put option pursuant to Article XVIII of the Company Agreement by
the Pledgor or any mandatory redemption under Article XVII of the Company
Agreement, upon the exercise of the put option pursuant to Article XVIII of the
Company Agreement by the Pledgor or any mandatory redemption under Article XVII
of the Company Agreement, the proceeds received by Pledgor shall be applied as
set forth in Section 13 of this Agreement.
Section 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Section362(a)), of (i) all obligations
and liabilities of every nature of Valhi now or hereafter existing under or
arising out of or in connection with the Subordinated Promissory Note and all
extensions or renewals thereof and any agreements or instruments entered into in
connection therewith, and (ii) all obligations and liabilities of every nature
of Pledgor now or hereafter existing under or arising out of or in connection
with the Second SPT Guaranty, in the case of each of clauses (i) and (ii)
whether for principal, interest (including without limitation interest that, but
for the filing of a petition in bankruptcy with respect to Valhi or Pledgor,
would accrue on such obligations), fees, expenses, indemnities or otherwise,
whether voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Secured Party as a preference, fraudulent transfer
or otherwise (all such obligations and liabilities being the "UNDERLYING DEBT"),
and all obligations of every nature of Pledgor now or hereafter existing under
this Agreement (all such obligations of Pledgor, together with the Underlying
Debt, being the "SECURED OBLIGATIONS").
Section 4. ASSIGNMENT TO AGENT; DELIVERY OF PLEDGED COLLATERAL
(a) Pledgor hereby acknowledges and agrees that Secured Party will assign
and grant a security interest in all of Secured Party's rights in, to and under
this Agreement and the Pledged Collateral to Agent for the benefit of the
holders of the 7.61% Senior Notes due September 30, 2012 (the "SENIOR NOTES")
issued by Secured Party pursuant to the Note Purchase Agreement (the "NOTE
PURCHASE AGREEMENT"), dated October 17, 2005, as the same may be amended,
supplemented or otherwise modified from time to time, among Secured Party, Agent
and the purchasers referred to therein, as security for Secured Party's
obligations under the Senior Notes and the Note Purchase Agreement, and
thereafter Agent shall have all of the rights granted to Secured Party
hereunder. So long as Agent has any security interest in this Agreement or the
Pledged Collateral, the term "Secured Party" shall include Agent for all
purposes under this Agreement.
(b) All certificates or instruments representing or evidencing the Pledged
Collateral shall be delivered to and held by or on behalf of Agent pursuant
hereto and to the Senior Pledge Agreement and shall be in suitable form for
transfer by delivery or, as applicable, shall be accompanied by Pledgor's
endorsement, where necessary, or duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Agent. Agent
shall have the right, at any time in its discretion and without notice to
Pledgor, to transfer to or to register in the name of Agent or any of its
nominees any or all of the Pledged Collateral, subject only to the revocable
rights specified in Section 8(a).
Section 5. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants
as follows:
(a) Organization and Powers. Pledgor is a business trust duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite power and authority to own and operate its properties, to
carry on its business as now conducted and proposed to be conducted and to enter
into this Agreement and carry out the transactions contemplated hereby.
(b) Authorization. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action by Pledgor.
(c) No Conflict. The execution, delivery and performance by Pledgor of this
Agreement will not (i) violate the Certificate of Trust or other organizational
documents of Pledgor, (ii) violate any provision of law applicable to Pledgor,
or any order, judgment or decree of any court or other agency of government
binding on Pledgor, (iii) be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Pledgor, (iv) result in or require the creation or
imposition of any Lien upon any of Pledgor's properties or assets, or (v)
require the approval of LLC or any direct or indirect beneficiary of Pledgor or
any approval or consent of any Person under any Contractual Obligation of
Pledgor other than the Company Agreement.
(d) Binding Obligation. This Agreement is the legally valid and binding
obligation of Pledgor, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or limiting
creditors' rights generally.
(e) Due Authorization, etc. of Pledged Equity. All of the Pledged Equity
has been duly authorized and validly issued and is fully paid and
non-assessable.
(f) Description of Pledged Equity. The Pledged Equity includes 94.7% of the
membership interests in the LLC, and there are no outstanding warrants, options
or other rights to purchase, or other agreements outstanding with respect to, or
property that is now or hereafter convertible into, or that requires the
issuance or sale of, any Pledged Equity other than the Company Agreement and the
Senior Pledge Agreement.
(g) Ownership of Pledged Collateral. Pledgor is the legal, record and
beneficial owner of the Pledged Collateral free and clear of any Lien, except
for the security interest created by this Agreement and subject to the
limitations set forth in the Deposit Trust Agreement and the Company Agreement.
(h) Governmental Authorizations. Other than the filing of appropriate UCC
financing statements with the Secretary of State (or Department of Business
Regulation, if applicable) of the States of Idaho and Delaware, no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for either (i) the pledge
by Pledgor of the Pledged Collateral pursuant to this Agreement and the grant by
Pledgor of the security interest granted hereby, (ii) the execution, delivery or
performance of this Agreement by Pledgor, or (iii) the exercise by Secured Party
of the voting or other rights, or the remedies in respect of the Pledged
Collateral, provided for in this Agreement (except as may be required in
connection with a disposition of Pledged Collateral by laws affecting the
offering and sale of securities generally).
(i) Perfection. The pledge of the Pledged Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Secured Obligations.
(j) Margin Regulations. The pledge of the Pledged Collateral pursuant to
this Agreement does not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
(k) Other Information. All information heretofore, herein or hereafter
supplied to Secured Party by or on behalf of Pledgor with respect to the Pledged
Collateral is accurate and complete in all material respects.
(l) Other Matters. To the best of Pledgor's knowledge, the granting of a
pledge and security interest in the Pledged Collateral hereunder to secure the
Secured Obligations will benefit ASC, as the sole owner of the Certificate Of
Beneficial Interest issued by Pledgor, because, among other reasons, (a) ASC, as
an indirectly, wholly-owned subsidiary of Valhi, may from time to time receive
capital contributions from Valhi to support its operations, and (b) Valhi has
centralized certain management, financial, accounting, administrative, income
tax, legal and risk management functions in one central office, and Valhi
directly and indirectly provides such services to ASC, from which ASC derives
benefit.
Section 6. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL; ETC.
Pledgor shall:
(a) not, except as may be expressly permitted by this Agreement, the
Deposit Trust Agreement, the Notes, or the Company Agreement (i) sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral or (ii) create or suffer to exist
any Lien upon or with respect to any of the Pledged Collateral, except for the
security interest under this Agreement and the Senior Pledge Agreement;
(b) (i) cause each issuer of Pledged Equity not to issue any equity in
addition to or in substitution for the Pledged Equity issued by such issuer,
except to Pledgor, and (ii) pledge hereunder, immediately upon acquisition
(directly or indirectly) thereof by the Pledgor, any and all additional equity
of each issuer of Pledged Equity;
(c) promptly deliver to Secured Party, and prior to the complete repayment
of the Senior Notes, the Agent, all written notices received by it with respect
to the Pledged Collateral; and
(d) pay promptly when due all taxes, assessments and governmental charges
or levies imposed upon, and all claims against, the Pledged Collateral, except
to the extent the validity thereof is being contested in good faith; provided
that Pledgor shall in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment entered or filed against Pledgor or any
of the Pledged Collateral as a result of the failure to make such payment.
Section 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will: (i)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby and (ii) at Secured
Party's request, appear in and defend any action or proceeding that may affect
Pledgor's title to or Secured Party's security interest in all or any part of
the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any additional
equity or securities required to be pledged hereunder as provided in Section
6(b), promptly (and in any event within five business days) deliver to Secured
Party a Pledge Amendment, duly executed by Pledgor, in substantially the form of
Schedule II annexed hereto (a "PLEDGE AMENDMENT"), in respect of the additional
Pledged Collateral to be pledged pursuant to this Agreement. Pledgor hereby
authorizes Secured Party to attach each Pledge Amendment to this Agreement and
agrees that all Pledged Collateral listed on any Pledge Amendment delivered to
Secured Party shall for all purposes hereunder be considered Pledged Collateral;
provided that the failure of Pledgor to execute a Pledge Amendment with respect
to any additional Pledged Collateral pledged pursuant to this Agreement shall
not impair the security interest of Secured Party therein or otherwise adversely
affect the rights and remedies of Secured Party hereunder with respect thereto.
Section 8. VOTING RIGHTS; ETC.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the terms of this Agreement or the Notes.
(ii) Secured Party shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies and other instruments as
Pledgor may from time to time reasonably request for the purpose of enabling
Pledgor to exercise the voting and other consensual rights which it is entitled
to exercise pursuant to paragraph (i) above.
(b) Upon the occurrence and during the continuation of an Event of Default
and upon written notice from Secured Party to Pledgor, all rights of Pledgor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 8(a)(i) shall cease, and all such
rights shall thereupon become vested in Secured Party who shall thereupon have
the sole right to exercise such voting and other consensual rights.
(c) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section 8(b),
(i) Pledgor shall promptly execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies and other instruments as Secured
Party may from time to time reasonably request and (ii) without limiting the
effect of the immediately preceding clause (i), Pledgor hereby grants to Secured
Party an irrevocable proxy to vote the Pledged Equity and to exercise all other
rights, powers, privileges and remedies to which a holder of the Pledged Equity
would be entitled (including, without limitation, giving or withholding written
consents of equity holders, calling special meetings of equity holders and
voting at such meetings), which proxy shall be effective, automatically and
without the necessity of any action (including any transfer of any Pledged
Equity on the record books of the issuer thereof) by any other Person (including
the issuer of the Pledged Equity or any officer or agent thereof), upon the
occurrence of an Event of Default and which proxy shall only terminate upon the
payment in full in cash of the Secured Obligations.
Section 9. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to file one or more financing or continuation statements, or amendments
thereto, relative to all or any part of the Pledged Collateral without the
signature of Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
and constituting any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to Pledgor
representing any dividend, principal or interest payment or other distribution
in respect of and constituting the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any proceedings that
Secured Party may deem necessary or desirable for the collection of any of the
Pledged Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Pledged Collateral.
Section 10. SECURED PARTY MAY PERFORM. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 14(b).
Section 11. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Pledged Collateral in its possession
and the accounting for moneys actually received by it hereunder, Secured Party
shall have no duty as to any Pledged Collateral, it being understood that
Secured Party shall have no responsibility for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Secured Party has or
is deemed to have knowledge of such matters, (b) taking any necessary steps
(other than steps taken in accordance with the standard of care set forth above
to maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary steps
to collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property consisting of negotiable securities.
Section 12. REMEDIES.
(a) If any Event of Default shall have occurred and be continuing, Secured
Party may exercise in respect of the Pledged Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE") (whether
or not the Code applies to the affected Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Secured Party
may deem commercially reasonable, irrespective of the impact of any such sales
on the market price of the Pledged Collateral. Secured Party may be the
purchaser of any or all of the Pledged Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at any such
public sale, to use and apply any of the Secured Obligations as a credit on
account of the purchase price for any Pledged Collateral payable by Secured
Party at such sale. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of Pledgor, and Pledgor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefore, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Pledgor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if Secured
Party accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral are insufficient to pay all the Secured
Obligations, Pledgor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions contained in
the Securities Act of 1933, as from time to time amended (the "SECURITIES ACT"),
and applicable state securities laws, Secured Party may be compelled, with
respect to any sale of all or any part of the Pledged Collateral conducted
without prior registration or qualification of such Pledged Collateral under the
Securities Act and/or such state securities laws, to limit purchasers to those
who will agree, among other things, to acquire the Pledged Collateral for their
own account, for investment and not with a view to the distribution or resale
thereof. Pledgor acknowledges that any such private sales may be at prices and
on terms less favorable than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act) and, notwithstanding such
circumstances, Pledgor agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Secured Party shall have
no obligation to engage in public sales and no obligation to delay the sale of
any Pledged Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if such
issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or all of
the Pledged Collateral, upon written request, Pledgor shall furnish to Secured
Party all such information as Secured Party may reasonably request in order to
determine the extent to which such equity interest and any instruments included
in the Pledged Collateral which may be sold by Secured Party in exempt
transactions under the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder, as the same are from time to time
in effect.
Section 13. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere
in this Agreement, all proceeds received by Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of Secured Party, be held by Secured Party as
Pledged Collateral for, and/or then, or at any time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:
FIRST: To the payment of all costs and expenses of such sale, collection or
other realization, including reasonable compensation to Secured Party and its
agents and counsel, and all other expenses, liabilities and advances made or
incurred by Secured Party in connection therewith, and all amounts for which
Secured Party is entitled to indemnification hereunder and all advances made by
Secured Party hereunder for the account of Pledgor, and to the payment of all
costs and expenses paid or incurred by Secured Party in connection with the
exercise of any right or remedy hereunder, all in accordance with Section 14;
SECOND: To the payment of all other Secured Obligations in such order as
Secured Party shall elect; and
THIRD: To the payment to or upon the order of Pledgor, or to whosoever may
be lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.
Notwithstanding anything to the contrary herein, upon the exercise of the put
option pursuant to Article XVIII of the Company Agreement by the Pledgor or any
mandatory redemption under Article XVII of the Company Agreement and otherwise,
in each case in compliance with the Company Agreement, the proceeds received by
Pledgor shall be applied to the payment of the Notes.
Section 14. INDEMNITY AND EXPENSES.
(a) Pledgor agrees to indemnify Secured Party from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
(b) Pledgor shall pay to Secured Party upon demand the amount of any and
all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
Section 15. SURETYSHIP WAIVERS BY PLEDGOR, ETC.
(a) Pledgor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than payment in full in cash of the Underlying Debt. In furtherance
of the foregoing and without limiting the generality thereof, Pledgor agrees as
follows: (i) Secured Party may from time to time, without notice or demand and
without affecting the validity or enforceability of this Agreement or giving
rise to any limitation, impairment or discharge of Pledgor's liability
hereunder, (A) renew, extend, accelerate or otherwise change the time, place,
manner or terms of payment of the Underlying Debt, (B) settle, compromise,
release or discharge, or accept or refuse any offer of performance with respect
to, or substitutions for, the Underlying Debt or any agreement relating thereto
and/or subordinate the payment of the same to the payment of any other
obligations, (C) request and accept guaranties of the Underlying Debt and take
and hold other security for the payment of the Underlying Debt, (D) release,
exchange, compromise, subordinate or modify, with or without consideration, any
other security for payment of the Underlying Debt, any guaranties of the
Underlying Debt, or any other obligation of any Person with respect to the
Underlying Debt, (E) enforce and apply any other security now or hereafter held
by or for the benefit of Secured Party in respect of the Underlying Debt and
direct the order or manner of sale thereof, or exercise any other right or
remedy that Secured Party may have against any such security, as Secured Party
in its discretion may determine consistent with the Notes and any applicable
security agreement, including foreclosure on any such security pursuant to one
or more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, and (F) exercise any other rights available to
Secured Party under the Notes, at law or in equity; and (ii) this Agreement and
the obligations of Pledgor hereunder shall be valid and enforceable and shall
not be subject to any limitation, impairment or discharge for any reason (other
than payment in full in cash of the Underlying Debt), including without
limitation the occurrence of any of the following, whether or not Pledgor shall
have had notice or knowledge of any of them: (A) any failure to assert or
enforce or agreement not to assert or enforce, or the stay or enjoining, by
order of court, by operation of law or otherwise, of the exercise or enforcement
of, any claim or demand or any right, power or remedy with respect to the
Underlying Debt or any agreement relating thereto, or with respect to any
guaranty of or other security for the payment of the Underlying Debt, (B) any
waiver, amendment or modification of, or any consent to departure from, any of
the terms or provisions (including without limitation provisions relating to
events of default) of the Notes or any agreement or instrument executed pursuant
thereto, or of any guaranty or other security for the Underlying Debt, (C) the
Underlying Debt, or any agreement relating thereto, at any time being found to
be illegal, invalid or unenforceable in any respect, (D) any failure to perfect
or continue perfection of a security interest in any other collateral which
secures any of the Underlying Debt, (E) any defenses, set-offs or counterclaims
which Pledgor or Valhi may allege or assert against Secured Party in respect of
the Underlying Debt, including but not limited to failure of consideration,
breach of warranty, payment, statute of frauds, statute of limitations, accord
and satisfaction and usury, and (F) any other act or thing or omission, or delay
to do any other act or thing, which may or might in any manner or to any extent
vary the risk of Pledgor as an obligor in respect of the Underlying Debt.
(b) Pledgor hereby waives, for the benefit of Secured Party: (i) any right
to require Secured Party, as a condition of payment or performance by Pledgor,
to (A) proceed against Valhi, any guarantor of the Underlying Debt or any other
Person, (B) proceed against or exhaust any other security held from Valhi, any
guarantor of the Underlying Debt or any other Person, (C) proceed against or
have resort to any balance of any deposit account or credit on the books of
Secured Party in favor of Valhi or any other Person, or (D) pursue any other
remedy in the power of Secured Party whatsoever; (ii) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of Valhi including, without limitation, any defense based on or arising out of
the lack of validity or the unenforceability of the Underlying Debt or any
agreement or instrument relating thereto or by reason of the cessation of the
liability of Valhi from any cause other than payment in full in cash of the
Underlying Debt; (iii) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal; (iv) any defense
based upon Secured Party's errors or omissions in the administration of the
Underlying Debt, except behavior which amounts to bad faith; (v) (A) any
principles or provisions of law, statutory or otherwise, which are or might be
in conflict with the terms of this Agreement and any legal or equitable
discharge of Pledgor's obligations hereunder, (B) the benefit of any statute of
limitations affecting Pledgor's liability hereunder or the enforcement hereof,
(C) any rights to set-offs, recoupments and counterclaims, and (D) promptness,
diligence and any requirement that Secured Party protect, secure, perfect or
insure any other security interest or lien or any property subject thereto; (vi)
notices, demands, presentments, protests, notices of protest, notices of
dishonor and notices of any action or inaction, notices of default under the
Notes or any agreement or instrument related thereto, notices of any renewal,
extension or modification of the Underlying Debt or any agreement related
thereto, notices of any extension of credit to Valhi and notices of any of the
matters referred to in the preceding paragraph and any right to consent to any
thereof; and (vii) to the fullest extent permitted by law, any defenses or
benefits that may be derived from or afforded by law which limit the liability
of or exonerate guarantors or sureties, or which may conflict with the terms of
this Agreement.
(c) As used in this Section 15, any reference to "the principal" includes
Pledgor and Valhi, and any reference to "the creditor" includes Secured Party.
(d) Until the Underlying Debt shall have been paid in full in cash, Pledgor
shall withhold exercise of (i) any claim, right or remedy, direct or indirect,
that Pledgor now has or may hereafter have against Valhi or any of its assets in
connection with this Agreement or the performance by Pledgor of its obligations
hereunder, in each case whether such claim, right or remedy arises in equity,
under contract, by statute, under common law or otherwise and including without
limitation (A) any right of subrogation, reimbursement or indemnification that
Pledgor now has or may hereafter have against Valhi, (B) any right to enforce,
or to participate in, any claim, right or remedy that Secured Party now has or
may hereafter have against Valhi, and (C) any benefit of, and any right to
participate in, any other collateral or security now or hereafter held by
Secured Party, and (ii) any right of contribution Pledgor may have against any
guarantor of any of the Underlying Debt. Pledgor further agrees that, to the
extent the waiver of its rights of subrogation, reimbursement, indemnification
and contribution as set forth herein is found by a court of competent
jurisdiction to be void or voidable for any reason, any rights of subrogation,
reimbursement or indemnification Pledgor may have against Valhi or against any
other collateral or security, and any rights of contribution Pledgor may have
against any such guarantor, shall be junior and subordinate to any rights
Secured Party may have against Valhi, to all right, title and interest Secured
Party may have in any such other collateral or security, and to any right
Secured Party may have against any such guarantor.
(e) Secured Party shall have no obligation to disclose or discuss with
Pledgor its assessment, or Pledgor's assessment, of the financial condition of
Valhi. Pledgor has adequate means to obtain information from Valhi on a
continuing basis concerning the financial condition of Valhi and its ability to
perform its obligations under the Notes, and Pledgor assumes the responsibility
for being and keeping informed of the financial condition of Valhi and of all
circumstances bearing upon the risk of nonpayment of the Underlying Debt.
Pledgor hereby waives and relinquishes any duty on the part of Secured Party to
disclose any matter, fact or thing relating to the business, operations or
condition of Valhi now known or hereafter known by Secured Party.
Section 16. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(a) remain in full force and effect until the payment in full in cash of all
Secured Obligations, (b) be binding upon Pledgor, its successors and assigns,
and (c) inure, together with the rights and remedies of Secured Party hereunder,
to the benefit of Secured Party and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), Secured Party may
assign or otherwise transfer the Notes to any other Person, including without
limitation Agent, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to Secured Party herein or otherwise.
Upon the payment in full in cash of all Secured Obligations, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to Pledgor. Upon any such termination Secured Party will, at
Pledgor's expense, execute and deliver to Pledgor such documents as Pledgor
shall reasonably request to evidence such termination, and Pledgor shall be
entitled to the return, upon its request and at its expense, against receipt and
without recourse to Secured Party, of such of the Pledged Collateral as shall
not have been sold or otherwise applied pursuant to the terms hereof.
Section 17. AMENDMENTS; ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.
Section 18. NOTICES. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served or sent
by telefacsimile, United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile, or three business days after depositing it in the United States
mail with postage prepaid and properly addressed. For the purposes hereof, the
address of each party hereto shall be as set forth under such party's name on
the signature pages hereof or, as to either party, such other address as shall
be designated by such party in a written notice delivered to the other party
hereto.
Section 19. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
Section 20. SEVERABILITY. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
Section 21. HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
Section 22. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
WASHINGTON, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT
THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
WASHINGTON. Unless otherwise defined herein or in the Notes, terms used in
Articles 8 and 9 of the Code in the State of Washington are used herein as
therein defined.
Section 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF WASHINGTON, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT PLEDGOR
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Pledgor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to Pledgor at
its address provided in Section 18, such service being hereby acknowledged by
Pledgor to be sufficient for personal jurisdiction in any action against Pledgor
in any such court and to be otherwise effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of Secured Party to bring
proceedings against Pledgor in the courts of any other jurisdiction.
Section 24. WAIVER OF JURY TRIAL. PLEDGOR AND SECURED PARTY HEREBY AGREE TO
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Pledgor and Secured Party each
acknowledge that this waiver is a material inducement for Pledgor and Secured
Party to enter into a business relationship, that Pledgor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Pledgor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
Section 25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
AMALGAMATED COLLATERAL TRUST
By: ASC Holdings, Inc., as Company Trustee
By: /s/Gregory M. Swalwell
-----------------------------------------------------
Gregory M. Swalwell
Vice President
Notice Address:
ASC Holdings, as Company Trustee for
Amalgamated Collateral Trust
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240
Attn: General Counsel
Fax: 972-448-1445
SNAKE RIVER SUGAR COMPANY
By: /s/Dave Budge
-----------------------------------------------------
Dave Budge
Vice President
Notice Address:
3184 Elder Street
Boise, Idaho, 83705
Fax: 208-383-6688
with a copy to:
Northwest Farm Credit Services, FLCA
1700 South Assembly Street
Spokane, Washington 99224
Attn: Mr. Stacy Lavin
and a copy to:
Northwest Farm Credit Services, FLCA
815 North College Road
Twin Falls, Idaho 83303
Attn: Mr. Jack Hetherington
SCHEDULE I
Attached to and forming a part of the Second Pledge Agreement dated as of
October 14, 2005 between Amalgamated Collateral Trust, as Pledgor, and Snake
River Sugar Company, as Secured Party.
Equity Equity Interest
The Amalgamated Sugar Company LLC AGM Interest, as defined
in the Company Agreement
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 20__, is delivered pursuant to
Section 7(b) of the Second Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Second Pledge
Agreement dated October 14, 2005, between the undersigned and Snake River Sugar
Company, as Secured Party (the "SECOND PLEDGE AGREEMENT," capitalized terms
defined therein being used herein as therein defined), and that the Pledged
Collateral listed on this Pledge Amendment shall be deemed to be and become part
of the Pledged Collateral and shall secure all Secured Obligations.
AMALGAMATED COLLATERAL TRUST
By: Wilmington Trust Company, not in its individual capacity but solely as
Resident Trustee
By:
--------------------------------------------------------
Name
--------------------------------------------------------
Title:
--------------------------------------------------------
By: ASC Holdings, Inc., as Company Trustee
By:
--------------------------------------------------------
Name
--------------------------------------------------------
Title:
--------------------------------------------------------
[LIST PLEDGED COLLATERAL]
EXECUTION COPY
EXHIBIT 10.5
SECOND SPT GUARANTY
This SECOND GUARANTY (this "GUARANTY") is entered into as of October 14,
2005 by AMALGAMATED COLLATERAL TRUST, a Delaware business trust ("GUARANTOR"),
in favor of and for the benefit of SNAKE RIVER SUGAR COMPANY, an Oregon
cooperative ("GUARANTIED PARTY").
WHEREAS, Valhi, Inc., a Delaware corporation ("VALHI") and the indirect
holder of 100% of the outstanding stock of ASC Holdings, Inc. ("ASC"), a Utah
Corporation and the sole owner of the Certificate of Beneficial Interest issued
by Guarantor, has issued to Guarantied Party that certain Limited Recourse
Promissory Note dated January 3, 1997 in aggregate principal amount of
$212,500,000 (the "LIMITED RECOURSE PROMISSORY NOTE") and that certain
Subordinated Promissory Note dated January 3, 1997 in aggregate principal amount
of $37,500,000 (the "SUBORDINATED PROMISSORY NOTE," and, together with the
Limited Recourse Promissory Note, as they may hereafter be amended, supplemented
or otherwise modified from time to time, being the "NOTES").
WHEREAS, The Notes were issued in connection with the acquisition by ASC of
a membership interest (the "AGM INTEREST") in The Amalgamated Sugar Company LLC,
a Delaware limited liability company ("LLC"), and ASC pledged the AGM Interest
to Guarantied Party to secure the Notes pursuant to a Pledge Agreement and a
Limited Recourse Pledge Agreement, each dated January 3, 1997, which Pledge
Agreement and Limited Recourse Pledge Agreement were amended, restated and
combined as of May 14, 1997 as The Amended and Restated Pledge Agreement between
ASC and Guarantied Party (the "ASC FIRST AMENDED AND RESTATED PLEDGE
AGREEMENT").
WHEREAS, ASC transferred and assigned the AGM Interest to Guarantor, and in
consideration of such transfer and assignment, (i) Guarantor guaranteed the
obligations of Valhi under the Limited Recourse Promissory Note and in certain
circumstances the obligations of Valhi under the Subordinated Promissory Note
pursuant to the Guaranty (SPT) dated as of May 14, 1997 (the "ORIGINAL SPT
GUARANTY") issued by Guarantor, and (ii) Guarantor issued to Secured Party a
security interest in the AGM Interest pursuant to the Pledge Agreement (SPT)
dated as of May 14, 1997 between Guarantor and Guarantied Party (the "ORIGINAL
SPT PLEDGE AGREEMENT").
WHEREAS, ASC has amended and restated the ASC First Amended and Restated
Pledge Agreement as the Second Amended and Restated Pledge Agreement, dated as
of October 14, 2005 between ASC and Guarantied Party (the "ASC SECOND AMENDED
AND RESTATED PLEDGE AGREEMENT"), and Guarantor has amended and restated the
Original SPT Pledge Agreement as the Second Pledge Agreement (SPT) dated as of
October 14, 2005 between Guarantor and Guarantied Party (the "SECOND SPT PLEDGE
AGREEMENT").
WHEREAS, Guarantor has and is willing to continue to irrevocably and
unconditionally guaranty the obligations of Valhi pursuant to the Notes.
WHEREAS, Guarantor and Guarantied Party desire to amend and restate the
Original SPT Guarantee, as reflected herein, and therefore this Guaranty shall
supersede the Original SPT Guaranty.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby agrees as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Guaranty, the following terms
shall have the following meanings unless the context otherwise requires:
"BENEFICIARIES" means Guarantied Party and, upon the assignment of
Guarantied Party's rights hereunder to the Agent pursuant to Section 4.12
hereof, the Noteholders.
"DEPOSIT TRUST AGREEMENT" means the Deposit Trust Agreement relating to
Guarantor dated as of May 14, 1997 between ASC, as Certificateholder and Company
Trustee (each as therein defined), and Wilmington Trust Company, as Resident
Trustee (as therein defined), as the same may be amended, supplemented or
otherwise modified from time to time.
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Guaranty dated as of October 14, 2005, as it may be
amended, supplemented or otherwise modified from time to time.
"LOAN DOCUMENTS" means the Notes, the ASC Second Amended and Restated
Pledge Agreement and the Second SPT Pledge Agreement, together with all
agreements and instruments entered into in connection therewith, as the same may
be amended, supplemented or otherwise modified from time to time.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment in full
of the Guarantied Obligations, including without limitation all principal,
interest, costs, fees and expenses (including, without limitation, reasonable
legal fees and expenses) of Beneficiaries as required under the Loan Documents.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks and other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"SUBSIDIARY" or "SUBSIDIARIES" means as to any Person (a) any
corporation(s) organized under the laws of any state of the United States of
which such Person or another Subsidiary of such Person, as the case may be,
beneficially owns or controls, either directly or indirectly, 100% of the
outstanding capital stock, and (b) any partnership(s) or other entities
organized under the laws of any state of the United States in which such Person
or another Subsidiary of such Person, as the case may be, holds a 100% equity
interest and controls the management of such entity, and (c) in the context of a
Subsidiary of Guarantied Party, LLC.
1.2 INTERPRETATION. References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Guaranty unless otherwise
specifically provided.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Guarantor hereby irrevocably
and unconditionally guaranties, as primary obligor and not merely as surety, the
due and punctual payment in full of all Guarantied Obligations when the same
shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)). The term "GUARANTIED
OBLIGATIONS" is used herein in its most comprehensive sense and includes:
(a) any and all obligations of Valhi in respect of advances, borrowings,
loans, debts, interest, fees, costs, expenses (including, without limitation,
legal fees and expenses of counsel and allocated costs of internal counsel),
indemnities and liabilities of whatsoever nature now or hereafter made, incurred
or created, whether absolute or contingent, liquidated or unliquidated, whether
due or not due, and however arising under or in connection with the Limited
Recourse Promissory Note and in connection with the Subordinated Promissory Note
(but only to the extent the Subordinated Promissory Note is, pursuant to its
terms, non-recourse to Valhi) and any instruments or agreements entered into in
connection therewith, including those arising under successive transactions
under the Notes which shall either continue such obligations of Valhi or from
time to time renew them after they have been satisfied and including interest
which, but for the filing of a petition in bankruptcy with respect to Valhi,
would have accrued on any Guarantied Obligations, whether or not a claim is
allowed against Valhi for such interest in the related bankruptcy proceeding;
and
(b) those expenses set forth in subsection 2.7 hereof.
2.2 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Guarantor hereby agrees,
in furtherance of the foregoing and not in limitation of any other right which
Guarantied Party or any Beneficiary may have at law or in equity against
Guarantor by virtue hereof, that upon the failure of Valhi to pay any of the
Guarantied Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)),
Guarantor will upon demand pay, or cause to be paid, in cash, to Guarantied
Party for the ratable benefit of Beneficiaries, an amount equal to the sum of
the unpaid principal amount of all Guarantied Obligations then due as aforesaid,
accrued and unpaid interest on such Guarantied Obligations (including, without
limitation, interest which, but for the filing of a petition in bankruptcy with
respect to Valhi, would have accrued on such Guarantied Obligations, whether or
not a claim is allowed against Valhi for such interest in the related bankruptcy
proceeding) and all other Guarantied Obligations then owed to Beneficiaries as
aforesaid. All such payments shall be applied promptly from time to time by
Guarantied Party:
First, to the payment of the costs and expenses of any collection or
realization under this Guaranty, including reasonable compensation to Guarantied
Party and its agents and counsel, and all expenses, liabilities and advances
made or incurred by Guarantied Party in connection therewith;
Second, to the payment of all other Guarantied Obligations in such order as
Guarantied Party shall elect; and
Third, after payment in full of all Guarantied Obligations, to the payment
to Guarantor, or its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may direct,
of any surplus then remaining from such payments.
2.3 LIABILITY OF GUARANTOR ABSOLUTE. Guarantor agrees that its obligations
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Guarantied
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of collectibility.
(b) Guarantied Party may enforce this Guaranty upon the occurrence of a default
under the Notes permitting or resulting in acceleration thereof notwithstanding
the existence of any dispute between Valhi and any Beneficiary with respect to
the existence of such default.
(c) The obligations of Guarantor hereunder are independent of the obligations of
Valhi under the Loan Documents and the obligations of any other guarantor of the
obligations of Valhi under the Loan Documents, and a separate action or actions
may be brought and prosecuted against Guarantor whether or not any action is
brought against Valhi or any of such other guarantors and whether or not Valhi
is joined in any such action or actions.
(d) Guarantor's payment of a portion, but not all, of the Guarantied Obligations
shall in no way limit, affect, modify or abridge Guarantor's liability for any
portion of the Guarantied Obligations which has not been paid. Without limiting
the generality of the foregoing, if Guarantied Party is awarded a judgment in
any suit brought to enforce Guarantor's covenant to pay a portion of the
Guarantied Obligations, such judgment shall not be deemed to release Guarantor
from its covenant to pay the portion of the Guarantied Obligations that is not
the subject of such suit.
(e) Any Beneficiary, upon such terms as it deems appropriate, without notice or
demand and without affecting the validity or enforceability of this Guaranty or
giving rise to any reduction, limitation, impairment, discharge or termination
of Guarantor's liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Guarantied Obligations, (ii) settle,
compromise, release or discharge, or accept or refuse any offer of performance
with respect to, or substitutions for, the Guarantied Obligations or any
agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations, (iii) request and accept other guaranties of
the Guarantied Obligations and take and hold security for the payment of this
Guaranty or the Guarantied Obligations, (iv) release, surrender, exchange,
substitute, compromise, settle, rescind, waive, alter, subordinate or modify,
with or without consideration, any security for payment of the Guarantied
Obligations, any other guaranties of the Guarantied Obligations, or any other
obligation of any Person with respect to the Guarantied Obligations, (v) enforce
and apply any security now or hereafter held by or for the benefit of such
Beneficiary in respect of this Guaranty or the Guarantied Obligations and direct
the order or manner of sale thereof, or exercise any other right or remedy that
such Beneficiary may have against any such security, in each case as such
Beneficiary in its discretion may determine consistent with the Loan Documents
and any applicable security agreement, including foreclosure on any such
security pursuant to one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable, and even though such
action operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of Guarantor against Valhi or any security
for the Guarantied Obligations and (vi) exercise any other rights available to
it under the Loan Documents.
(f) This Guaranty and the obligations of Guarantor hereunder shall be valid and
enforceable and shall not be subject to any reduction, limitation, impairment,
discharge or termination for any reason (other than payment in full of the
Guarantied Obligations), including without limitation the occurrence of any of
the following, whether or not Guarantor shall have had notice or knowledge of
any of them: (i) any failure or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order of court,
by operation of law or otherwise, of the exercise or enforcement of, any claim
or demand or any right, power or remedy (whether arising under the Loan
Documents, at law, in equity or otherwise) with respect to the Guarantied
Obligations or any agreement relating thereto, or with respect to any other
guaranty of or security for the payment of the Guarantied Obligations; (ii) any
rescission, waiver, amendment or modification of, or any consent to departure
from, any of the terms or provisions (including without limitation provisions
relating to events of default) of the Loan Documents or any agreement or
instrument executed pursuant thereto, or of any other guaranty or security for
the Guarantied Obligations, in each case whether or not in accordance with the
terms of such Loan Document or any agreement relating to such other guaranty or
security; (iii) the Guarantied Obligations, or any agreement relating thereto,
at any time being found to be illegal, invalid or unenforceable in any respect;
(iv) any Beneficiary's consent to the change, reorganization or termination of
the corporate structure or existence of Valhi or any of its Subsidiaries and to
any corresponding restructuring of the Guarantied Obligations; (v) any failure
to perfect or continue perfection of a security interest in any collateral which
secures any of the Guarantied Obligations; (vi) any defenses, set- offs or
counterclaims which Valhi may allege or assert against any Beneficiary in
respect of the Guarantied Obligations, including but not limited to failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (vii) any other act or thing
or omission, or delay to do any other act or thing, which may or might in any
manner or to any extent vary the risk of Guarantor as an obligor in respect of
the Guarantied Obligations.
2.4 WAIVERS BY GUARANTOR. Guarantor hereby waives, for the benefit of
Beneficiaries:
(a) any right to require Guarantied Party or any Beneficiary, as a
condition of payment or performance by Guarantor, to (i) proceed against Valhi,
any other guarantor of the Guarantied Obligations or any other Person, (ii)
proceed against or exhaust any security held from Valhi, any such other
guarantor or any other Person, (iii) proceed against or have resort to any
balance of any deposit account or credit on the books of any Beneficiary in
favor of Valhi or any other Person, or (iv) pursue any other remedy in the power
of Guarantied Party or any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of authority or
any disability or other defense of Valhi including, without limitation, any
defense based on or arising out of the lack of validity or the unenforceability
of the Guarantied Obligations or any agreement or instrument relating thereto or
by reason of the cessation of the liability of Valhi from any cause other than
payment in full of the Guarantied Obligations;
(c) any defense based upon any statute or rule of law which provides that
the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(d) any defense based upon Guarantied Party's or any Beneficiary's errors
or omissions in the administration of the Guarantied Obligations, except
behavior which amounts to bad faith;
(e) (i) any principles or provisions of law, statutory or otherwise, which
are or might be in conflict with the terms of this Guaranty and any legal or
equitable discharge of Guarantor's obligations hereunder, (ii) the benefit of
any statute of limitations affecting Guarantor's liability hereunder or the
enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims,
and (iv) promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any security interest or lien or any property subject
thereto;
(f) notices, demands, presentments, protests, notices of protest, notices
of dishonor and notices of any action or inaction, including acceptance of this
Guaranty, notices of default under the Loan Documents or any agreement or
instrument related thereto, notices of any renewal, extension or modification of
the Guarantied Obligations or any agreement related thereto, notices of any
extension of credit to Valhi and notices of any of the matters referred to in
subsection 2.3 and any right to consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by law
which limit the liability of or exonerate guarantors or sureties, or which may
conflict with the terms of this Guaranty.
2.5 GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Guarantor hereby
waives any claim, right or remedy, direct or indirect, that Guarantor now has or
may hereafter have against Valhi or any of its assets in connection with this
Guaranty or the performance by Guarantor of its obligations hereunder, in each
case whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including without limitation (a) any
right of subrogation, reimbursement or indemnification that Guarantor now has or
may hereafter have against Valhi, (b) any right to enforce, or to participate
in, any claim, right or remedy that any Beneficiary now has or may hereafter
have against Valhi, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guarantied Obligations shall have been indefeasibly paid in full,
Guarantor shall withhold exercise of any right of contribution Guarantor may
have against any other guarantor of the Guarantied Obligations. Guarantor
further agrees that, to the extent the waiver or agreement to withhold the
exercise of its rights of subrogation, reimbursement, indemnification and
contribution as set forth herein is found by a court of competent jurisdiction
to be void or voidable for any reason, any rights of subrogation, reimbursement
or indemnification Guarantor may have against Valhi or against any collateral or
security, and any rights of contribution Guarantor may have against any such
other guarantor, shall be junior and subordinate to any rights any Beneficiary
may have against Valhi, to all right, title and interest any Beneficiary may
have in any such collateral or security, and to any right any Beneficiary may
have against such other guarantor. If any amount shall be paid to Guarantor on
account of any such subrogation, reimbursement, indemnification or contribution
rights at any time when all Guarantied Obligations shall not have been paid in
full, such amount shall be held in trust for Guarantied Party on behalf of
Beneficiaries and shall forthwith be paid over to Guarantied Party for the
benefit of Beneficiaries to be credited and applied against the Guarantied
Obligations, whether matured or unmatured, in accordance with the terms hereof.
2.6 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Valhi now or
hereafter held by Guarantor is hereby subordinated in right of payment to the
Guarantied Obligations, and any such indebtedness of Valhi to Guarantor
collected or received by Guarantor after a default on the Notes has occurred and
is continuing shall be held in trust for Guarantied Party on behalf of
Beneficiaries and shall forthwith be paid over to Guarantied Party for the
benefit of Beneficiaries to be credited and applied against the Guarantied
Obligations but without affecting, impairing or limiting in any manner the
liability of Guarantor under any other provision of this Guaranty.
2.7 EXPENSES. Guarantor agrees to pay, or cause to be paid, on demand, and
to save Beneficiaries harmless against liability for, any and all costs and
expenses (including fees and disbursements of counsel and allocated costs of
internal counsel) incurred or expended by Guarantied Party or any Beneficiary in
connection with the enforcement of or preservation of any rights under this
Guaranty.
2.8 CONTINUING GUARANTY; TERMINATION OF GUARANTY. This Guaranty is a
continuing guaranty and shall remain in effect until all of the Guarantied
Obligations shall have been paid in full. Guarantor hereby irrevocably waives
any right to revoke this Guaranty as to future transactions giving rise to any
Guarantied Obligations.
2.9 AUTHORITY OF GUARANTOR OR VALHI. It is not necessary for any
Beneficiary to inquire into the capacity or powers of Guarantor or Valhi or the
officers, directors or any agents acting or purporting to act on behalf of any
of them.
2.10 RIGHTS CUMULATIVE. The rights, powers and remedies given to Guarantied
Party and Beneficiaries by this Guaranty are cumulative and shall be in addition
to and independent of all rights, powers and remedies given to Guarantied Party
and Beneficiaries by virtue of any statute or rule of law or in any of the Loan
Documents or any agreement between Guarantor and Guarantied Party or any
Beneficiary or Beneficiaries or between Valhi and Guarantied Party or any
Beneficiary or Beneficiaries or among Beneficiaries. Any forbearance or failure
to exercise, and any delay by any Beneficiary in exercising, any right, power or
remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further exercise of
any such right, power or remedy.
2.11 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY.
(a) So long as any Guarantied Obligations remain outstanding, Guarantor shall
not, without the prior written consent of Guarantied Party in accordance with
the terms of the Loan Documents, commence or join with any other Person in
commencing any bankruptcy, reorganization or insolvency proceedings of or
against Valhi. The obligations of Guarantor under this Guaranty shall not be
reduced, limited, impaired, discharged, deferred, suspended or terminated by any
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency,
receivership, reorganization, liquidation or arrangement of Valhi or by any
defense which Valhi may have by reason of the order, decree or decision of any
court or administrative body resulting from any such proceeding.
(b) Guarantor acknowledges and agrees that any interest on any portion of the
Guarantied Obligations which accrues after the commencement of any proceeding
referred to in clause (a) above (or, if interest on any portion of the
Guarantied Obligations ceases to accrue by operation of law by reason of the
commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantor and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantor pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Valhi of any
portion of such Guarantied Obligations. Guarantor will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar Person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied Obligations are paid
by Valhi, the obligations of Guarantor hereunder shall continue and remain in
full force and effect or be reinstated, as the case may be, in the event that
all or any part of such payment(s) are rescinded or recovered directly or
indirectly from any Beneficiary as a preference, fraudulent transfer or
otherwise, and any such payments which are so rescinded or recovered shall
constitute Guarantied Obligations for all purposes under this Guaranty.
2.12 NOTICE OF EVENTS. As soon as Guarantor obtains knowledge thereof,
Guarantor shall give Guarantied Party written notice of any condition or event
which has resulted in (a) a material adverse change in the financial condition
of Guarantor or Valhi or (b) a breach of or noncompliance with any term,
condition or covenant contained herein or in the Loan Documents or any other
document delivered pursuant hereto or thereto.
2.13 SET OFF. In addition to any other rights any Beneficiary may have
under law or in equity, if any amount shall at any time be due and owing by
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being hereby
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including but not limited to indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of such Beneficiary owing to Guarantor and any other property
of Guarantor held by any Beneficiary to or for the credit or the account of
Guarantor against and on account of the Guarantied Obligations and liabilities
of Guarantor to any Beneficiary under this Guaranty.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Guarantied Party and Beneficiaries to accept this Guaranty
and to enter into the Loan Documents, Guarantor hereby represents and warrants
to Beneficiaries that the following statements are true and correct:
3.1 TRUST EXISTENCE. Guarantor is duly formed, validly existing and in good
standing under the laws of the State of Delaware and has the trust power to own
its assets and to transact the business in which it is now engaged.
3.2 TRUST POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Guarantor has the
trust power, authority and legal right to execute, deliver and perform this
Guaranty and all obligations required hereunder and has taken all necessary
trust action to authorize its Guaranty hereunder on the terms and conditions
hereof and its execution, delivery and performance of this Guaranty and all
obligations required hereunder. No consent of any other Person including,
without limitation, certificateholders and creditors of Guarantor, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by Guarantor in connection with this Guaranty or the execution,
delivery, performance, validity or enforceability of this Guaranty and all
obligations required hereunder. This Guaranty has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
trustee of Guarantor, and this Guaranty constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of Guarantor, enforceable
against Guarantor in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws or equitable principles relating to or limiting creditors'
rights generally.
3.3 NO LEGAL BAR TO THIS GUARANTY. The execution, delivery and performance
of this Guaranty and the documents or instruments required hereunder will not
violate any provision of any existing law or regulation binding on Guarantor, or
any order, judgment, award or decree of any court, arbitrator or governmental
authority binding on Guarantor, or the Deposit Trust Agreement of Guarantor or
any securities issued by Guarantor, or any mortgage, indenture, lease, contract
or other agreement, instrument or undertaking to which Guarantor is a party or
by which Guarantor or any of its assets may be bound, the violation of which
would have a material adverse effect on the business, operations, assets or
financial condition of Guarantor and its Subsidiaries, taken as a whole, and
will not result in, or require, the creation or imposition of any lien on any of
its property, assets or revenues pursuant to the provisions of any such
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking.
3.4 BENEFIT TO ASC. To the best of Guarantor's knowledge, the issuance of
this Guaranty hereunder to with respect to the Guarantied Obligations will
benefit ASC, as the sole owner of the Certificate Of Beneficial Interest issued
by Guarantor, because, among other reasons, (a) ASC, as an indirectly,
wholly-owned subsidiary of Valhi, may from time to time receive capital
contributions from Valhi to support its operations, and (b) Valhi has
centralized certain management, financial, accounting, administrative, income
tax, legal and risk management functions in one central office, and Valhi
directly and indirectly provides such services to ASC, from which ASC derives
benefit.
SECTION 4. MISCELLANEOUS
4.1 SURVIVAL OF WARRANTIES. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Guaranty and the
Loan Documents.
4.2 NOTICES. Any communications between Guarantied Party and Guarantor and
any notices or requests provided herein to be given may be given by mailing the
same, postage prepaid, or by facsimile transmission to each such party at its
address set forth in the Loan Documents or to such other addresses as each such
party may in writing hereafter indicate. Any notice, request or demand to or
upon Guarantied Party or Guarantor shall not be effective until received.
4.3 SEVERABILITY. In case any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
4.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, Guarantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
4.5 HEADINGS. Section and subsection headings in this Guaranty are included
herein for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose or be given any substantive effect.
4.6 APPLICABLE LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
GUARANTOR AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
WASHINGTON, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
4.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
shall be binding upon Guarantor and its successors and assigns. This Guaranty
shall inure to the benefit of Beneficiaries and their respective successors and
assigns. Guarantor shall not assign this Guaranty or any of the rights or
obligations of Guarantor hereunder without the prior written consent of
Guarantied Party. Any Beneficiary may, without notice or consent, assign its
interest in this Guaranty in whole or in part. The terms and provisions of this
Guaranty shall inure to the benefit of any transferee or assignee of the Notes,
and in the event of such transfer or assignment the rights and privileges herein
conferred upon such Beneficiary shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
4.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE OF WASHINGTON. BY EXECUTING AND
DELIVERING THIS AGREEMENT, GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND
VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO
GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 4.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO
CONFER PERSONAL JURISDICTION OVER GUARANTOR IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
AND
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST GUARANTOR IN THE
COURTS OF ANY OTHER JURISDICTION.
4.9 WAIVER OF TRIAL BY JURY. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS GUARANTY. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Guarantor and, by its acceptance of the benefits hereof, each
Beneficiary each (i) acknowledges that this waiver is a material inducement for
Guarantor and Beneficiaries to enter into a business relationship, that
Guarantor and Beneficiaries have already relied on this waiver in entering into
this Guaranty or accepting the benefits thereof, as the case may be, and that
each will continue to rely on this waiver in their related future dealings and
(ii) further warrants and represents that each has reviewed this waiver with its
legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A
MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 4.9 AND EXECUTED
BY GUARANTIED PARTY AND GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
In the event of litigation, this Guaranty may be filed as a written consent to a
trial by the court.
4.10 NO OTHER WRITING. This writing is intended by Guarantor and
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or trade
usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
4.11 FURTHER ASSURANCES. At any time or from time to time, upon the request
of Guarantied Party, Guarantor shall execute and deliver such further documents
and do such other acts and things as Guarantied Party may reasonably request in
order to effect fully the purposes of this Guaranty.
4.12 ACKNOWLEDGEMENT. Guarantor hereby acknowledges and agrees that
Guarantied Party will assign and grant a security interest in all of Guarantied
Party's rights in, to and under this Guaranty to Northwest Farm Credit Services,
FLCA, as agent (the " AGENT") for the benefit of the holders (the "NOTEHOLDERS")
of the 7.61% Senior Notes due September 30, 2012 (the "SENIOR NOTES") issued by
Guarantied Party pursuant to the Note Purchase Agreement, dated October 17,
2005, among Guarantied Party, Agent and the purchasers referred to therein (the
"NOTE PURCHASE AGREEMENT"), as the same may be amended, supplemented or
otherwise modified from time to time, as security for Guarantied Party's
obligations under the Senior Notes and the Note Purchase Agreement, and
thereafter the Agent shall have all of the rights granted to Guarantied Party
hereunder. So long as the Agent has any security interest in this Guaranty, the
term "GUARANTIED PARTY" shall include the Agent for all purposes under this
Agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and
delivered by its trustee thereunto duly authorized as of the date first written
above.
AMALGAMATED COLLATERAL TRUST
By: ASC Holdings, Inc., as Company Trustee
By: /s/Gregory M. Swalwell
--------------------------------------------------------------
Gregory M. Swalwell
Vice President
SNAKE RIVER SUGAR COMPANY
By: /s/Dave Budge
--------------------------------------------------------------
Dave Budge
Vice President
EXECUTION COPY
EXHIBIT 10.6
OPTION AGREEMENT
This OPTION AGREEMENT is dated October 14, 2005 (this "Agreement"), by and
among Snake River Sugar Company, an Oregon cooperative corporation (the
"Company"), Valhi, Inc., a Delaware corporation ("Valhi") and the holders of the
Company's 7.61% Senior Notes due September 30, 2012, as the same may be amended
from time to time (the "Senior Notes") whose names are set forth on the
signature page of this Agreement (the "Noteholders").
RECITALS
FIn connection with the Noteholders' acquisition of certain Senior Notes from
the Company pursuant to the terms of a Note Purchase Agreement dated as of
October 17, 2005 among Northwest Farm Credit Services, FLCA, both as a purchaser
and as agent on behalf of all of the purchasers (the "Agent"), the other
purchasers named therein and the Company, as the same may be amended from time
to time (the "Note Purchase Agreement"), the Noteholders have collectively
agreed to grant Valhi the right to acquire the Senior Notes owned or held by the
Noteholders (the "Option Notes"), pursuant to and on the terms and conditions
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the effectiveness of the Note Purchase Agreement.
Now, therefore, in consideration of the foregoing and for other good and
sufficient consideration, receipt of which is hereby acknowledged, the parties
agree as follows:
1. Grant of Option. The Noteholders hereby collectively grant to Valhi an
irrevocable option (the "Option") to purchase all but not less than all of the
Option Notes (including any principal, interest or other amounts owing to
Noteholders from the Company in respect of the Option Notes). The exercise price
of the Option (the "Exercise Price") shall be an amount in cash equal to the sum
of (i) the principal outstanding on the Option Notes, (ii) all accrued interest
on the Option Notes, (iii) an amount equal to the sum of the Make Whole Amounts
and Cost Reimbursement Amounts (as each are defined in the Note Purchase
Agreement) related to the Option Notes and which would be required to be paid by
the Company upon a voluntary prepayment of the Option Notes, and (iv) an amount
equal to any other amounts which would be required to be paid by the Company
pursuant to Article III of the Note Purchase Agreement upon a voluntary
prepayment of the Option Notes , in each case as of the closing referred to in
Section 3.
2. Exercise of Option. The Option may be exercised by Valhi in whole and
not in part at any time after the date of this Agreement, subject to the
condition that, prior to or concurrently with such exercise, Valhi acquire all
Senior Notes issued by the Company pursuant to the Note Purchase Agreement. If
Valhi wishes to exercise the Option, Valhi shall send a written notice to the
Agent on behalf of the Noteholders and to the Company specifying the Exercise
Price and the place, date and time (but not earlier than 10 Business Days (as
defined in the Note Purchase Agreement) from the date such notice is given) for
the closing of such purchase. The parties' obligations in connection with the
exercise of the Option are subject to compliance with applicable legal
requirements. Upon request of Valhi, the Company shall promptly take all action
required to effect the exercise of the Option (including certifying to Valhi,
upon request, information concerning the outstanding principal, accrued interest
and applicable Make Whole Amount of the Option Notes, any defaults or events of
default under the Senior Notes and any other information requested).
3. Closing of the Option and Transfer of the Option Notes. At the closing
of the exercise of the Option pursuant to this Agreement, Noteholders shall
deliver to the Company the Option Notes, in proper form for transfer, and the
Company will issue a new Senior Note to Valhi in the principal amount of the
Senior Notes being purchased. At such closing, Valhi will purchase and pay for
the Option Notes being purchased from Noteholders by wire transfer to the Agent
on behalf of the Noteholders of cash in an amount equal to the Exercise Price.
4. Representations and Warranties of Valhi. Valhi represents and warrants
to Noteholders that (a) Valhi is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power to enter into and perform this Agreement; (b) this
Agreement has been duly authorized by all necessary corporate action on the part
of Valhi; (c) Valhi is not subject to or obligated under any provision of (i)
its Certificate of Incorporation or By-Laws, (ii) any contract, (iii) any
license, franchise or permit or (iv) any law, regulation, order, judgment or
decree, which would be breached or violated by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby, other than any such breaches or violations which will not,
individually or in the aggregate, have a material adverse effect on the
consummation of the transactions contemplated hereby, and (d) any acquisition of
the Option Notes pursuant to the terms and conditions of this Agreement shall be
for Valhi's own account and not with a view to distribution of the Option Notes.
No authorization, consent or approval of, or filing with, any public body, court
or authority is necessary for the execution, delivery and performance by Valhi
of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals and filings as to which the failure to
obtain or make would not, individually or in the aggregate, have a material
adverse effect on the consummation of the transactions contemplated by this
Agreement.
5. Representations and Warranties of Noteholders. Each Noteholder
represents and warrants to Valhi that (a) such Noteholder is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the requisite power to enter into and
perform this Agreement; (b) this Agreement has been duly authorized by all
necessary corporate action on the part of such Noteholder; (c) such Noteholder
is not subject to or obligated under any provision of (i) its organizational
documents, (ii) any contract, (iii) any license, franchise or permit or (iv) any
law, regulation, order, judgment or decree, which would be breached or violated
by its execution, delivery and performance of this Agreement and the
consummation by it of the transactions contemplated hereby, other than any such
breaches or violations which will not, individually or in the aggregate, have a
material adverse effect on the consummation of the transactions contemplated
hereby; and (d) when its Option Note(s) are delivered by such Noteholder to
Valhi upon exercise of the Option and payment of the Exercise Price, such
Noteholder will deliver good, legal and valid title in and to its Option
Note(s), free and clear of any claims, liens, encumbrances, security interests
and charges of any nature whatsoever (other than any such claims, liens,
encumbrances, security interests and charges created by Valhi). Each Noteholder
further represents and warrants that as of the date of this Agreement, no
authorization, consent or approval of, or filing with, any public body, court or
authority is necessary for the execution, delivery and performance by such
Noteholder of this Agreement, except for such authorizations, consents,
approvals and filings as to which the failure to obtain or make would not,
individually or in the aggregate, have a material adverse effect on the
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing, each Noteholder makes no representation or warranty regarding the
applicability of any federal or state securities laws or regulations, or whether
the application of such laws or regulations would prohibit, place restrictions
on, or require authorization of any the transactions contemplated by this
Agreement.
6. Legend. Upon execution of this Agreement, the Company and Noteholders
shall place the following legend in a conspicuous place on the Option Notes:
"This Note is subject to the terms and conditions of that certain Option
Agreement dated October 14, 2005, by and between the issuer, Valhi, Inc. and the
holder of this Note."
7. Amendment; Assignment. This Agreement may not be modified, amended,
altered or supplemented except by a writing signed by Valhi and Noteholders.
Each of the provisions of this Agreement shall be binding upon Noteholders and
its successors and assigns. Valhi may not assign any of its rights or
obligations under this Agreement (other than to any affiliate of Valhi) without
the prior written consent of Noteholders.
8. Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and, except as otherwise
provided in this Agreement, shall be deemed to have been duly given if so given)
if delivered in person, by cable, telegram, facsimile, or sent by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
If to Noteholders (at the addresses specified on Schedule I to this Agreement)
If to Valhi:
Valhi, Inc.
Three Lincoln Centre, Suite 1700,
5430 LBJ Freeway,
Dallas, Texas 75240
Attn: General Counsel
If to the Company:
Snake River Sugar Company
3184 Elder Street
Boise, Idaho 83705
Attn: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but each of which
together shall constitute one and the same document.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Washington, without giving
effect to the principles of conflicts of laws thereof.
11. Binding Effect. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the heirs, personal representatives,
successors and assigns of the parties hereto. Nothing expressed or referred to
in this Agreement is intended or shall be construed to give any person other
than the parties to this Agreement, or their respective heirs, personal
representatives, successors or assigns, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
12. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof.
13. Termination. This Agreement shall terminate upon the repayment in full
of the Option Notes.
14. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
15. Further Assurances. The parties will execute and deliver such documents
and take such action reasonably deemed necessary or desirable to more
effectively complete and evidence the sale and transfer of the Option Notes
pursuant to this Agreement.
16. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections, subsections and
clauses refer to Sections, subsections and clauses of this Agreement unless
otherwise stated.
17. Notification. The Company agrees to provide a copy of any amendment,
modification, waiver or restatement of the Senior Notes or the Note Purchase
Agreements to Valhi within five (5) business days after execution of any such
amendment, modification, waiver or restatement. The Company and Valhi agree and
acknowledge that if any such amendment, modification, waiver or restatement of
the Senior Notes or the Note Purchase Agreement are not so provided to Valhi by
the Company within the time period required herein, then, at Valhi's sole
option, such amendment, modification, waiver or restatement shall retroactively
be null and void upon (but only upon) the closing of the purchase of the Option
Notes following the exercise by Valhi of all of its rights under this Agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
on the day and year first above written.
VALHI, INC.
By: /s/Gregory M. Swalwell
--------------------------------------------------------------
Gregory M. Swalwell
Vice President
SNAKE RIVER SUGAR COMPANY
By: /s/Dave Budge
--------------------------------------------------------------
Dave Budge
Vice President
NORTHWEST FARM CREDIT SERVICES, FLCA
By: /s/Jack Hetherington
--------------------------------------------------------------
Jack Hetherington
Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /s/Jan Thede
-------------------------------------------------------------
Jan Thede
Vice President
Schedule I - Address of Noteholder
Northwest Farm Credit Services, FLCA
815 North College Road
Twin Falls, Idaho 83301
Attn: Jack Hetherington
U.S. Bank National Association National Corporate Banking (PL-4) 555 S. W. Oak
Street
Portland, Oregon 97204
Attn: Janice T. Thede
EXECUTION COPY
EXHIBIT 10.7
AMENDED AND RESTATED COMPANY AGREEMENT
OF
THE AMALGAMATED SUGAR COMPANY LLC,
A DELAWARE LIMITED LIABILITY COMPANY
MEMBER MANAGED
AMENDED AND RESTATED COMPANY AGREEMENT
This Company Agreement (this "Agreement" or this "Company Agreement") of
The Amalgamated Sugar Company LLC, a limited liability company organized
pursuant to the Act, was entered into and was effective as of the Effective
Date, by and among the Company, ASC Holdings, Inc. (then known as The
Amalgamated Sugar Company, a Utah corporation) ("AGM") and Snake River Sugar
Company, an Oregon cooperative ("SRSC"), and is amended and restated as of
October 14, 2005 to reflect changes made pursuant to the (i) First Amendment to
Company Agreement dated as of May 14, 1997 among the Company, SRSC, AGM, and the
Amalgamated Collateral Trust, a Delaware business trust (the "Trust"), (ii)
Second Amendment to Company Agreement dated as of November 30, 1998 among the
Company, SRSC, AGM and the Trust and (iii) Third Amendment to Company Agreement
dated as of October 19, 2000 among the Company, SRSC, AGM and the Trust, as well
as other changes made pursuant to this amendment and restatement. All references
to this Company Agreement or this Agreement shall mean this Company Agreement,
as so amended and restated. Capitalized terms not otherwise defined in this
Agreement have the meanings ascribed to such terms in Article II.
ARTICLE I
FORMATION
1.1 ORGANIZATION. AGM and SRSC organized the Company as a Delaware limited
liability company pursuant to the provisions of the Act by filing that certain
Certificate of Formation with the Secretary of State of Delaware on December 20,
1996, and by entering into that certain Formation Agreement by and among AGM,
SRSC and the Company, dated as of January 3, 1997, to be effective for tax and
accounting purposes as of December 31, 1996, with Exhibit D-7 thereto amended by
the Second Amendment to Memorandum of Agreement Between SRSC and the Company
dated September 30, 1998 (the "Formation Agreement").
1.2 NAME. The name of the Company is The Amalgamated Sugar Company LLC, and all
business of the Company shall be conducted under that name except to the extent
necessary for qualification purposes in those states where AGM's presence
initially requires the Company to use a trade name or with the consent of all of
the Members.
1.3 EFFECTIVE DATE. This Company Agreement became effective upon January 3,
1997, the closing under the Formation Agreement (the "Effective Date").
1.4 TERM. The term of the Company commenced on the Effective Date and will
continue until the Company shall be dissolved and its affairs wound up in
accordance with the Act or this Company Agreement.
1.5 REGISTERED AGENT AND OFFICE. The Company's initial registered office and the
name of its initial registered agent at such address shall be as set forth in
the Company's Certificate of Formation. The Management Committee may, from time
to time, change the registered agent or office through appropriate filings with
the Secretary of State. In the event the registered agent ceases to act as such
for any reason or the registered office shall change, the Management Committee
shall promptly designate a replacement registered agent or file a notice of
change of address as the case may be. If the Management Committee shall fail to
designate a replacement registered agent or change of address of the registered
office, any Member may designate a replacement registered agent or file a notice
of change of address upon notice to the other Members.
1.6 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the Company
shall be 3184 Elder Street, Boise, Idaho, 83705. The Company may locate its
place of business to any other place or places as the Management Committee may
from time to time deem advisable.
ARTICLE II
DEFINITIONS
For purposes of this Company Agreement, unless the context clearly indicates
otherwise, and subject to the provisions of Article XIX of this Company
Agreement, the following terms shall have the following meanings:
ACCRUAL - means the sum of (i) the positive excess, if any, of (A) the product
of $2,224,781 times the cumulative number of months which have elapsed during
any Fiscal Year of the Company, commencing with January 1, 1997, less (B) the
cash distributions to all Members pursuant to Section 9.3.1(a) in connection
with such months and less the cash distributions pursuant to Section 9.3.1(b)(i)
for the Fiscal Year relating to such months, plus (ii) interest on any amount
determined pursuant to clause (i), compounded annually, at an annual rate of
10.145%, calculated on a daily basis from the date cash distributions for such
month are or would have been made pursuant to Section 9.3.1(a) to the date the
Accrual relating to such date is actually distributed to the Members pursuant to
Section 9.3.1; provided, however, that commencing on April 1, 2000, interest
pursuant to clause (ii) shall be at an annual rate of 6.49% and shall no longer
be compounded, but all interest accrued prior to April 1, 2000 (including
compounded interest) shall continue to be included in the determination of
Accrual and provided further, however, that no interest (including compounded
interest) shall continue to bear interest pursuant to clause (ii) subsequent to
March 31, 2000."
ACCRUAL THRESHOLD - means the amount of (A) $31,526,316.00 from October 14, 2005
through October 30, 2005, (B) $18,300,000.00 from October 31, 2005 to November
29, 2005, (C) $11,300,000.00 from November 30, 2005 to December 30, 2005, (D)
$10,000,000.00 from December 31, 2005 to January 30, 2006, (E) $9,000,000.00
from January 31, 2006 to February 27, 2006, (F) $8,200,000.00 from February 28,
2006 to March 30, 2006, (G) $7,500,000.00 from March 31, 2006 to April 29, 2006,
(H) $6,600,000.00 from April 30, 2006 to May 30, 2006, (I) $5,800,000.00 from
May 31, 2006 to June 29, 2006, (J) $5,000,000.00 from June 30, 2006 to July 30,
2006, (K) $4,200,000.00 from July 31, 2006 to August 30, 2006, (L) $3,300,000.00
from August 31, 2006 to September 29, 2006, (M) $2,500,000.00 from September 30,
2006 to October 30, 2006, (N) $1,600,000.00 from October 31, 2006 to November
29, 2006, (O) $800,000 from November 30, 2006 to December 30, 2006 and (P) nil
from December 31, 2006 and thereafter, provided, however, that if (i) any Beet
Payment Reduction taken by the Company in order to generate Distributable Cash
sufficient to ensure that the Accrual does not exceed the Accrual Threshold
would result in SRSC paying to its grower members a SRSC Beet Payment for any
crop year that aggregated less than $1,000 per acre and (ii) Distributable Cash
for the Fiscal Year that includes the date on which the last payment of the SRSC
Beet Payment for such crop year is paid would be greater than $26,697,372, then
the Accrual Threshold shall be increased from the amounts specified above by the
lesser of (y) the amount necessary to decrease such Distributable Cash to
$26,697,372 and (z) the amount necessary to increase such SRSC Beet Payment to
$1,000 per acre, and provided further, however, that any such increase in the
Accrual Threshold from the amounts specified above shall be temporary and shall,
subject to the conditions provided herein, revert back to the amounts specified
above for all subsequent periods at the earliest possible month, and provided
further, however, that once the Accrual Threshold has been reduced to nil in
accordance with the terms of this definition, it shall thereafter remain at nil
for all periods, regardless of the actual level of Distributable Cash for any
Fiscal Year and regardless of the SRSC Beet Payment actually paid by SRSC to its
grower members for any crop year .
ACT - means the Delaware Limited Liability Company Act, as amended from time to
time.
ADDITIONAL MEMBER - means a Person other than an Initial Member or a Substitute
Member who has acquired a Membership Interest from the Company.
AFFILIATE - means , at any time, and with respect to any Person, (a) any other
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
AGENT - means Northwest Farm Credit Services, FLCA, as the agent for the benefit
of the purchasers under the Note Purchase Agreement and the NWFC Pledge and
Security Agreement, and any successor agent pursuant to the terms of such
agreements.
AGGREGATE CONSOLIDATED NET INCOME - means, as at any date of determination, the
aggregate Consolidated Net Income of the Company and its Subsidiaries during the
thirty-six (36) month period then most recently ended.
AGM - has the meaning set forth in the preamble to this Company Agreement.
AGM CAPITAL INTEREST - means the proportion that the positive Capital Account of
a Member holding the AGM Interest bears to the aggregate positive Capital
Accounts of all Members holding the AGM Interest whose Capital Accounts have
positive balances as may be adjusted from time to time.
AGM INTEREST - means the Membership Interest received by AGM on the Effective
Date and transferred to the Trust on May 14, 1997.
ANNUAL OPERATING PLAN - has the meaning set forth in Section 7.2.1.
ARTICLES - means the Certificate of Formation of the Company as properly adopted
and amended from time to time by the Members and filed with the Secretary of
State of Delaware.
ASSIGNEE - means a Person to whom a Membership Interest has been transferred who
has not been admitted as a Substitute Member.
ASSIGNING MEMBER - has the meaning set forth in Section 5.1.2.
BANK INDEBTEDNESS - means revolving Indebtedness in a principal amount not to
exceed $150 million incurred by the Company in connection with providing working
capital for the Company, and any refinancing of such Indebtedness with a bank or
other financial institution, provided that, without the written consent of the
holders of a Majority of the AGM Interest, the maximum amount of Indebtedness
permitted to be incurred in any such refinancing does not increase over the
maximum amount of Indebtedness outstanding immediately prior to such
refinancing, and the terms and conditions of such refinancing do not materially
adversely affect the holders of the AGM Interest.
BANKRUPT MEMBER - means a Member which has commenced any proceeding under any
bankruptcy, debt arrangement, or insolvency law of any jurisdiction, whether now
or hereafter in effect, or a Member against which any such proceeding has been
commenced and to which the Member by any act or omission has indicated approval
thereof, consent thereto or acquiescence therein, or as to which an order shall
be entered and remain in effect for more than 120 days approving the petition in
any such proceeding.
BEET PAYMENT - means the payments by the Company to SRSC for sugarbeets that
would have been incurred if the Company made such payments at the times and
pursuant to the terms and conditions as set forth in the Agreement attached as
Exhibit D-7 to the Formation Agreement, as amended through September 30, 1998.
BEET PAYMENT REDUCTION - means the amount by which the Beet Payment must be
reduced in order for the LLC to generate at least $25 million of Distributable
Cash in each Fiscal Year beginning with the Fiscal Year ending December 31,
2005.
BUSINESS - has the meaning set forth in Article III.
BUSINESS DAY - means any day excluding a Saturday, Sunday and any day which is a
legal holiday under the laws of the State of Idaho or is a day on which banking
institutions located in such state are closed.
CAPITAL ACCOUNT - means, as of any given date, the Capital Contributions to the
Company by a Member or Assignee as adjusted up to the date in question pursuant
to Article VIII.
CAPITAL CONTRIBUTION - means any contribution to the capital of the Company in
cash or Property by a Member or Assignee pursuant to Article VIII.
CAPITAL LEASE OBLIGATIONS - means with respect to any Person and a Capital Lease
(which means, at any time, a lease with respect to which he lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP), the amount of the obligation of such Person
as the lessee under such Capital Lease which would, in accordance with GAAP,
appear as a liability on a balance sheet of such Person
CCC LOANS - means loans made by the Commodity Credit Corporation or any
successor entity to the Company.
CHANGE OF CONTROL EVENT - means the termination of full-time employment with the
Company as a result of resignation or removal (for any reason) of any five of
the following nine individuals prior to the expiration of such individual's
employment contract in effect as of October 14, 2005: Ralph C. Burton, K. Pete
Chertudi, W. E. "Bill" Smith, David L. Budge, Victor J. Jaro, Wayne P. Neeley,
Dennis D. Costesso, Joseph P. Huff and John C. McCreedy.
CODE - mean the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, as amended, and any reference to a section of the Code
shall include any successor section or provision of the Code.
COMPANY - means The Amalgamated Sugar Company LLC, a limited liability company
formed under the Act, and any successor limited liability company.
COMPANY AGREEMENT - means this Company Agreement including all amendments
adopted in accordance with this Company Agreement and the Act.
COMPANY MINIMUM GAIN - means the gain (regardless of character) which would be
realized by the Company if the Property subject to a nonrecourse debt (other
than a "partner nonrecourse debt" as such term is defined in Section
1.704-2(b)(4) of the Regulations) were disposed of in full satisfaction of such
debt on the relevant date. Such amount shall be computed separately for each
nonrecourse liability of the Company. For this purpose the adjusted basis of
Property subject to two or more liabilities of equal priority shall be allocated
among such liabilities in proportion to the outstanding balances of such
liabilities and the adjusted basis of Property subject to two or more
liabilities of unequal priority shall be allocated to the liability of inferior
priority only to the extent of the excess, if any, of the adjusted basis of such
Property over the aggregate outstanding balance of the liabilities of superior
priority. If Property is reflected in the Capital Accounts of the Company at
other than its basis, Company Minimum Gain shall be determined by using the
amount recorded for such Property in determining Capital Accounts instead of the
basis of such Property.
COMPANY TRUSTEE - has the meaning given in the Deposit Trust Agreement.
CONSOLIDATED - means with respect to the accounting item with respect to any
Person, such item on a consolidated basis for such Person and its Subsidiaries.
CONSOLIDATED NET INCOME - means with respect to any Person, Consolidated gross
revenues less all operating and non-operating expenses and other proper charges
determined in accordance with GAAP; provided that there shall be excluded from
the calculation of Consolidated Net Income:
(1) extraordinary gains;
(2) gains or losses resulting from the sale or other disposition of
capital assets;
(3) undistributed earnings of non-Subsidiary Investments;
(4) gains arising from changes in accounting principles;
(5) gains arising from the write-up of assets;
(6) any earnings of a Person acquired by the Company or any Subsidiary
of the Company prior to the date such acquisition occurs; and
(7) any gains or losses resulting from the retirement or
extinguishment of Debt.
CONSOLIDATED TANGIBLE ASSETS - means the total net book value of all assets of
the Company and its Subsidiaries (excluding goodwill, trade names, copyrights,
trademarks, other intangible assets, and write-ups of assets after October 14,
2005) determined on a Consolidated basis as of the last day of the Company's
most recently ended fiscal year.
CONTROL ACTION - means the exercise by the holders of the AGM Interest of their
rights under Article XVI of this Company Agreement.
CURRENT DEBT - means any Debt that is payable on demand or that matures within
one year, without any option on the part of the borrower or issuer thereunder to
extend or renew such Debt for a period of more than one year from the date of
original issuance or borrowing. Notwithstanding the foregoing, Current Debt
shall include the Bank Indebtedness and the CCC Loans.
DEBT - means , with respect to any Person:
(a) any indebtedness for borrowed money, (including commercial paper
and revolving credit line borrowings), or which is evidenced by bonds,
debentures or notes, or otherwise representing the deferred purchase price of
property or extensions of credit, whether or not representing obligations for
borrowed money (other than trade, payroll and taxes payable),
(b) indebtedness of a third party secured by Liens on the assets of
such Person or a Subsidiary of such Person,
(c) Capital Lease Obligations,
(d) Guarantees,
(e) with the exception of the AGM Interest, capital stock (or similar
equity interests) that provides for mandatory redemption or repurchase or
repurchase at the option of the holder thereof (and, if such Person is a
Subsidiary of the Company, all capital stock (or similar equity interests) which
is preferred as to liquidation and is held by Persons other than the Company or
a Wholly-Owned Subsidiary of the Company);
(f) obligations with respect to Swaps, letters or credit and similar
obligations; and
(g) modifications, renewals and extensions of the above.
DEFICIT CAPITAL ACCOUNT - means the deficit balance, if any, in a Capital
Account as of the end of the taxable year, after giving effect to the following
adjustments:
(1) credit to such Capital Account any amount which such Member is
obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the Regulations, as
well as any addition thereto pursuant to the next to last sentence of Sections
1.704-2(g)(1) and (i)(5) of the Regulations after taking into account thereunder
any changes during such year in partnership minimum gain (as determined in
accordance with Section 1.704-2(d) of the Regulations) and in the minimum gain
attributable to any partner nonrecourse debt (as determined under Section
1.704-2(i)(3) of the Regulations); and
(2) debit to such Capital Account of the items described in Sections
1.704-l(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
This definition of Deficit Capital Account is intended to comply with the
provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and 1.704-2, and will be
interpreted consistently with those provisions.
DEPOSIT TRUST AGREEMENT - means the Deposit Trust Agreement dated as of May 14,
1997, as amended as of October 14, 2005, and as the same may be further amended,
supplemented or otherwise modified from time to time, between AGM and Wilmington
Trust Company, a Delaware banking corporation,
DEPRECIATION - means, for each Fiscal Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an
asset for such Fiscal Year, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such Fiscal Year, Depreciation shall be an amount which bears the same ratio
to such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Fiscal Year bears to
such beginning adjusted tax basis; provided, however, that if the adjusted basis
for federal income tax purposes of an asset at the beginning of such Fiscal Year
is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Management Committee.
DISPOSITION (OR DISPOSE) - means any sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation or other transfer, absolute or as
security or encumbrance (including dispositions by operation of law).
DISTRIBUTABLE CASH - means, without duplication (A) the Company's net income for
financial statement purposes for each Fiscal Year, calculated in accordance with
GAAP, plus (i) actual book depreciation, depletion, amortization and interest
expense included in the calculation of net income, less (ii) actual capital
expenditures and actual interest paid (net of interest capitalized); provided,
however, that in calculating net income (x) the first-in, first-out method of
accounting for inventories shall be used regardless of the method actually used
by the Company to account for inventories, (y) expenses to reflect the cost to
purchase sugarbeets shall not exceed the Beet Payment, regardless of the actual
expense amounts recorded or payments made for sugarbeets by the Company and (z)
net income shall exclude any income or expense realized upon a Major Capital
Event, and (B) any net cash proceeds to the Company generated from a Major
Capital Event. For purposes of Section 9.3.1, the term Distributable Cash shall
not include net cash proceeds to the Company from a Major Capital Event.
EFFECTIVE DATE - has the meaning set forth in Section 1.3.
EXCESS BEET PAYMENT - means the amounts, if any, by which the Company's expenses
to purchase sugarbeets exceeded the Beet Payment during such Fiscal Year.
FAIR MARKET VALUE - means at any time and with respect to any property, the sale
value of such property that would be realized in an arm's-length sale at such
time between an informed and willing buyer and an informed and willing seller
(neither being under a compulsion to buy or sell).
FISCAL YEAR - means the Company's fiscal year beginning January 1 and ending
December 31 of each year.
FORMATION AGREEMENT - has the meaning set forth in Section 1.1.
FUNDED DEBT - means all Debt other than Current Debt.
GAAP - means United States generally accepted accounting principles applied on a
basis consistent with the accounting practices used by AGM during its 1996
fiscal year.
GROSS ASSET VALUE - means, with respect to any asset, the asset's adjusted basis
for federal income tax purposes, except as follows:
(1) The initial Gross Asset Value of any asset contributed by a Member or
Assignee to the Company shall be the gross fair market value of such asset, as
determined by the contributing Member or Assignee and the Management Committee,
provided that the initial Gross Asset Values of the assets contributed to the
Company pursuant to Section 8.1 shall be as set forth in APPENDIX A.
(2) The Gross Asset Values of all Company assets shall be adjusted to equal
their respective gross fair market values, as determined by the unanimous vote
of the Members as of the following times: (a) the acquisition of an additional
interest by any new or existing Member or Assignee in exchange for more than a
de minimis contribution of Property (including money); (b) the distribution by
the Company to a Member or Assignee of more than a de minimis amount of Property
(including money) as consideration for a Membership Interest; and (c) the
liquidation of the Company within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g): provided, however, that adjustments pursuant to clauses
(a) and (b) above shall be made only if the Management Committee reasonably
determines in good faith that such adjustments are necessary to reflect the
relative economic interests of the Members in and the Assignees of the Company.
(3) The Gross Asset Value of any Company asset distributed to any Member or
Assignee shall be adjusted to equal the gross fair market value of such asset on
the date of distribution as determined by the unanimous vote of the Members.
(4) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 732(d), 734(b) or 743(b), but only to the extent that
such adjustments are taken into account in determining Capital Accounts pursuant
to Regulation Section 1.704-l(b)(2)(iv)(m) and Section 8.3 and subsection (4)
under the definition of Net Profits and Net Losses; provided, however, that
Gross Asset Values shall not be adjusted pursuant to this definition to the
extent the Management Committee determines that an adjustment pursuant to
subsection (2) of this definition is necessary in connection with a transaction
that would otherwise result in an adjustment pursuant to this subsection (4).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subsection (1), (2) or (4) of this definition, then such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Net Profits and Net Losses.
GUARANTEES - means with respect to any Person, any direct or indirect liability,
contingent or otherwise, of such Person with respect to any Debt, lease,
dividend or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business) or discounted or sold
with recourse by such Person, or in respect of which such Person is otherwise
directly or indirectly liable, including, without limitation, any such
obligation in effect guaranteed by such Person through any agreement (contingent
or otherwise) to (i) maintain the solvency or any balance sheet or other
financial condition of another Person or (ii) make payment for any products,
materials or supplies or for any transportation or services regardless of the
non-delivery or non-furnishing thereof, in any such case if the purpose or
effect of such agreement is to provide assurance that such obligation will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected against loss in
respect thereof. Guarantees shall include obligations of partnerships and joint
ventures of which such Person or any Subsidiary is a general partner or
co-venturer that is not expressly non-recourse to such Person or such
Subsidiary.
INDEBTEDNESS - means all indebtedness for borrowed money, indebtedness evidenced
by notes, debentures, bonds or similar instruments, capitalized lease
obligations, and any guarantees of the obligations of another Person.
INVESTMENT - means any investment, made in cash or by delivery of property, by
the Company or any of its Subsidiaries in any Person, whether by acquisition of
stock, Debt or other obligation or Security (as defined in Section 2(1) of the
Securities Act of 1933, as amended from time to time), or by loan, Guarantee,
advance, capital contribution or otherwise.
INFORMATION - has the meaning set forth in Section 15.4.
INITIAL CAPITAL CONTRIBUTION - means the Capital Contributions agreed to be made
by the Initial Members as of January 3, 1997, as described in Section 8.1 and as
specifically described on APPENDIX A.
INITIAL MEMBERS - means AGM and SRSC.
INSURANCE EVENT - means any transaction or series of transactions involving
payment in connection with any condemnations, easements, net recoveries of
damage awards and insurance proceeds (other than incident to or resulting in the
liquidation of the Company), which payment exceeds $50,000 and is not promptly
reinvested in the Company's business.
MAJOR CAPITAL EVENT - means any transaction or series of transactions involving
(i) any sale, transfer or other disposition of all or substantially all of the
Company's assets (other than in the ordinary course of business), (ii) any
Insurance Event, or (iii) any financing or refinancing the purpose of which
financing or refinancing is to distribute all or part of the proceeds to the
Members.
MAJORITY OF THE SR INTEREST - means holders of the SR Interest which taken
together exceed 50% of the SR Capital Interests and, for purposes of Article
XIII, 50% of the interest in Profits allocable to holders of the SR Capital
Interest.
MAJORITY OF THE AGM INTEREST - means holders of the AGM Interest which taken
together exceed 50% of the AGM Capital Interests and, for purposes of Article
XIII, 50% of the interest in Profits allocable to holders of the AGM Capital
Interest.
MANAGEMENT COMMITTEE - has the meaning set forth in Section 5.1.
MATERIAL - means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.
MATERIAL ADVERSE EFFECT - means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company
and its Subsidiaries taken as a whole, (b) the ability of the Company to perform
its obligations under the Company Agreement, or (c) the validity or
enforceability of the Company Agreement.
MEMBER - means an Initial Member, Substituted Member or Additional Member,
provided, that when used in connection with the distribution of cash and the
allocation of profit, loss and other items under Article IX, Member shall
include any Assignee.
MEMBERSHIP INTEREST - means the rights of a Member or, in the case of an
Assignee, the rights of the assigning Member, in distributions (liquidating or
otherwise) and allocations of the Net Profits, Net Losses and other federal
income tax items of gains, deductions and credits of the Company.
MEMBER MINIMUM GAIN - means the gain (regardless of character) which would be
realized by the Company if Property subject to a "partner nonrecourse debt" (as
such term is defined in Section 1.704-2(b)(4) of the Regulations) were disposed
of in full satisfaction of such debt on the relevant date. The adjusted basis of
Property subject to more than one partner nonrecourse debt shall be allocated in
a manner consistent with the allocation of basis for purposes of determining
Company Minimum Gain under this Company Agreement.
NET PROFITS or NET LOSSES - means, for each taxable year of the Company, an
amount equal to the Company's net taxable income or loss for such year as
determined for federal income tax purposes (including separately stated items)
in accordance with (a) the accounting method and rules used by the Company and
(b) Section 703 of the Code, with the following adjustments:
(1) Any items of income, gain, loss and deduction specifically or specially
allocated to Members or Assignees pursuant to Section 9.2 shall not be taken
into account in computing Net Profits or Net Losses;
(2) Any income of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Net Profits and Net Losses shall
be added to such taxable income or loss;
(3) Any expenditure of the Company described or deemed described in Section
705(a)(2)(B) of the Code and not otherwise taken into account in computing Net
Profits and Net Losses shall be subtracted from such taxable income or loss;
(4) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to clause (2) or (3) of the definition of Gross Asset Value, the amount
of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Profits and Net Losses;
(5) Gain or loss resulting from any disposition of any Company asset with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed with reference to the Gross Asset Value of the asset disposed
of, notwithstanding that the adjusted tax basis of such asset differs from its
Gross Asset Value;
(6) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year; and
(7) To the extent an adjustment to the adjusted tax basis of any Company
Property pursuant to Section 732(d), 734(b) or 743(b) of the Code is required
pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations to be taken into
account in determining Capital Accounts, the amount of such adjustment shall be
treated as an item of gain (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for purposes
of computing Net Profits or Net Losses.
NOTE PURCHASE AGREEMENT - means the Note Purchase Agreement dated as of October
17, 2005, among the Agent, SRSC and the purchasers named therein, pursuant to
which SRSC issued the Senior Notes.
NWFC PLEDGE AND SECURITY AGREEMENT - means the Pledge and Security Agreement
dated as of October 17, 2005 from SRSC to Agent, as agent for the benefit of the
holders of the Senior Notes.
PERCENTAGE OF EARNINGS CAPACITY - means, with respect to assets of the Company,
and/or its Subsidiaries Transferred or proposed to be Transferred, the ratio
(expressed as a percentage) of (i) Consolidated Net Income produced by or
attributable to such assets during the thirty-six (36) month period most
recently ended prior to the date of their Transfer or proposed Transfer to (ii)
Aggregate Consolidated Net Income.
PERSON - means an individual, a partnership, a limited liability company, a
cooperative, a corporation, an association, a joint stock company, a trust, an
estate, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
PLANT COLLATERAL - has the meaning given in the Note Purchase Agreement.
PROPERTY - means any property real or personal, tangible or intangible,
including money and any legal or equitable interest in such property, but
excluding services and promises to perform services in the future. PUT OPTION
CONSIDERATION - means the sum of $250,000,000 (in the sale of all of the AGM
Interest originally issued) or the applicable portion thereof (in the sale of a
portion of the AGM Interest), plus any Retained Amounts (or, in the case of the
sale of a portion of the AGM Interest, the part of any Retained Amounts relating
to such portion). PUT NOTICE - has the meaning set forth in Section 18.1. PUT
OPTION - has the meaning set forth in Section 18.1. REDEMPTION DATE - has the
meaning set forth in Section 17.2. REDEMPTION PRICE - means the sum of
$250,000,000 (in the redemption of all of the AGM Interest originally issued) or
the applicable portion thereof (in the redemption of a portion of the AGM
Interest), plus any Retained Amounts (or, in the case of the sale of a portion
of the AGM Interest, the part of any Retained Amounts relating to such portion).
REGULATIONS - means, except where the context indicates otherwise, the
permanent, proposed or temporary regulations of the Department of the Treasury
under the Code as such regulations may be lawfully changed from time to time.
REQUIRED PURCHASERS - has the meaning given in the Note Purchase Agreement.
RESIDENT TRUSTEE - has the meaning given in the Deposit Trust Agreement.
RETAINED AMOUNTS - means 95% of any Accrual, including any applicable accrued
interest.
SECURITY DOCUMENTS - has the meaning given in the Note Purchase Agreement.
SENIOR NOTES - means the 7.61% Senior Notes due September 30, 2012, issued by
SRSC under the Note Purchase Agreement.
SHARING RATIO - means with respect to the holders of the SR Interest, 5.3% and
with respect to the holders of the AGM Interest, 94.7%.
SNAKE RIVER PLEDGE AGREEMENT - means the Second Amended and Restated Pledge
Agreement dated as October 14, 2005 between SRSC and AGM, as the same may be
amended from time to time..
SPT GUARANTY - means the Second SPT Guaranty entered into as of October 14, 2005
by the Trust for the benefit of SRSC, as the same may be amended form time to
time.
SPT PLEDGE AGREEMENT - means the Second Pledge Agreement dated as of October 14,
2005 among SRSC and the Trust, as the same may be amended from time to time.
SR CAPITAL INTEREST - means the proportion that the positive Capital Account of
a Member holding an SR Interest bears to the aggregate positive Capital Accounts
of all Members holding SR Interests whose Capital Accounts have positive
balances as may be adjusted from time to time.
SR INTEREST - means the Membership Interest received by SRSC on the Effective
Date.
SRSC - has the meaning set forth in the preamble of this Company Agreement.
SRSC BEET PAYMENT - means the payments by SRSC to its grower members for
sugarbeets, including the Beet Payment plus any additional cash available to
SRSC which SRSC uses to pay to its grower members for sugarbeets.
SRSC DEFAULT - means a default which permits the Senior Notes to be accelerated.
SRSC SUBORDINATED DEBT - has the meaning as set forth in Section 9.3.1.
SUBSIDIARY or SUBSIDIARIES - means as to any Person (a) any corporation(s)
organized under the laws of any state of the United States of which such Person
or another Subsidiary of such Person, as the case may be, beneficially owns or
controls, either directly or indirectly, 100% of the outstanding capital stock,
and (b) any partnership(s) or other entities organized under the laws of any
state of the United States in which such Person or another Subsidiary of such
Person, as the case may be, holds a 100% equity interest and controls the
management of such entity.
SUBSTANTIAL PART - means, as of any date of determination and with respect to
assets of the Company and/or its Subsidiaries, any of the following:
(a) assets having, when taken together with all other assets
Transferred by the Company and/or its Subsidiaries during the twelve month
period immediately preceding the date of determination, an aggregate net book
value or an aggregate Fair Market Value (whichever is greater) equal to or
greater than 10% of Consolidated Tangible Assets;
(b) assets having, when taken together with all other assets
Transferred by the Company and/or its subsidiaries from and after October 14,
2005, an aggregate net book value or an aggregate Fair Market Value (whichever
is greater) equal to or greater than 25% of Consolidated Tangible Assets;
(c) assets having, when taken together with all other assets
Transferred by the Company and/or its Subsidiaries during the twelve month
period immediately preceding the date of determination, an aggregate Percentage
of Earnings Capacity equal to or greater than 10%; or (d) assets having, when
taken together with all other assets Transferred by the Company and/or its
Subsidiaries from and after October 14, 2005, an aggregate Percentage of
Earnings Capacity equal to or greater than 25%.
SUBSTITUTE MEMBER - means an Assignee who has been admitted to all of the rights
of membership pursuant to this Company Agreement.
SWAPS - means, with respect to any Person, payment obligations with respect to
interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
TRANSFER OR TRANSFERRED - means to consolidate with or merge with any other
corporation or otherwise effect a recapitalization or restructuring or convey,
transfer or lease any of its assets in a single transaction or series of
transactions to any Person or Persons.
TRUST - has the meaning set forth in the preamble of this Company Agreement.
TRIGGERING EVENT - means any failure by the Management Committee or the Company
to comply in all material respects with any provision of this Company Agreement;
provided, however, that so long as the Company has promptly notified the holders
of the AGM Interest of the existence of such a failure pursuant to Section
7.2.2(e), such failure (other than a failure to comply with the provisions of
Section 6.3(i), 6.3(ii), 6.3(xiv), 6.3(xv), 6.3(xx), 6.3(xxi), 6.3(xxii) and
7.2.3), if capable of being cured, shall not be deemed to be a Triggering Event
unless such failure has not been cured within 30 days after the holders of the
AGM Interest have given the Company notice.
VALHI DEFAULT - means a default which permits the Valhi Loans to be accelerated.
VALHI OBLIGATION SECURITY DOCUMENTS - has the meaning given in the Note Purchase
Agreement.
VALHI LOANS - means the loan by SRSC to Valhi in the amount of $212,500,000, and
the loan by SRSC to Valhi, in the amount of $37,500,000, each dated as January
3, 1997.
VALHI - means Valhi, Inc., a Delaware corporation.
WITHDRAWAL EVENT - has the meaning set forth in Section 13.1.1(b).
WHOLLY-OWNED SUBSIDIARY - means with respect to any Person, at any time, any
Subsidiary of such Person one hundred percent (100%) of all of the equity
interests (except directors' qualifying shares) and voting interests of which
are owned by any one or more of such Person and such Person's other Wholly-Owned
Subsidiaries at such time.
ARTICLE III
NATURE OF BUSINESS
The Company's business shall be the production and sale of sugar and
by-products (the "Business"). The Company shall have the authority to do all
things necessary or convenient to operate its Business as described in this
Article III including renewal, amending, modifying or altering any permit,
consent or authorization. The Company exists only for the purposes specified in
this Article III and may not conduct any other business without the consent of
the affirmative vote of all of the Members as provided in this Agreement.
ARTICLE IV
NAMES AND ADDRESSES OF MEMBERS
The names and addresses of the Members are identified on APPENDIX A.
ARTICLE V
THE MANAGEMENT OF THE COMPANY
5.1 MANAGEMENT OF THE COMPANY BY THE MANAGEMENT COMMITTEE.
5.1.1 The business and affairs of the Company shall be managed by the
Members. The Members shall exercise such management duties through a Management
Committee of seven representatives (the "Management Committee"), all of whom
initially shall be appointed by SRSC, and shall continue to be appointed by SRSC
subject to Article XVI. Except when the representatives to the Management
Committee are appointed by the holders of a Majority of the AGM Interest
pursuant to Article XVI, each representative to the Management Committee shall
be an officer, director or employee of SRSC and a member of SRSC, actively
engaged in the growing of sugarbeets. The representatives as of October 14, 2005
are the individuals identified on APPENDIX A. Each representative to the
Management Committee shall serve until such representative's resignation, death,
disability or until removal by SRSC or, upon a Triggering Event, by the holders
of a Majority of the AGM Interest pursuant to Article XVI.
5.1.2 Any Member may at any time remove any of its Management Committee
representatives appointed by such Member and appoint a substitute representative
by delivering written notice of such substitution to the other Members. In the
event any Member assigns all or any portion of its Membership Interest (an
"Assigning Member") to a Person that is admitted as a Member pursuant to the
terms of this Agreement, the Assigning Member may, in its sole discretion, elect
to allow such Substitute or Additional Members to designate any of the Assigning
Member's representatives to the Management Committee by delivering written
notice of such election to the other Members.
5.1.3 Each representative to the Management Committee shall have one vote
in all actions required or permitted to be taken by the Management Committee.
All actions taken by the Management Committee must be by: (i) a majority vote of
the representatives then holding office and entitled to vote at a meeting of the
Management Committee; or (ii) by the affirmative written consent of a majority
of the representatives to the Management Committee which would be entitled to
vote at a meeting of the Management Committee called for the purpose of taking
such action, in which case prompt written notice of such action shall be given
to any representative not executing such written consent.
5.1.4 No representative of the Management Committee shall be entitled to
compensation from the Company solely for serving in such capacity.
5.1.5 The Management Committee shall review the operation of the business
and the management of the Company and shall establish meeting times, dates and
places and requisite notice requirements and adopt rules or procedures as it
deems necessary. Any Member may call a special meeting of the Management
Committee for any purpose by giving the other Members and their respective
representatives to the Management Committee at least 24 hours' written or
telephonic notice thereof, except in the case of an emergency, in which case,
such notice as is practicable shall be sufficient.
5.1.6 One or more representatives to the Management Committee may attend
meetings of the Management Committee by means of conference telephone call.
5.1.7 The Management Committee shall appoint and terminate senior officers
of the Company (including a Chief Executive Officer), define their duties and
establish their compensation.
5.2 AUTHORITY TO BIND THE COMPANY. The Management Committee shall have full and
complete authority, power and discretion to manage and control the business,
affairs and properties of the Company, to make all determinations regarding
those matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business except for matters
expressly reserved to the determination of the Members elsewhere in this Company
Agreement, including, but not limited to, the matters set forth in Section 6.3.
5.3 DUTIES OF THE MANAGEMENT COMMITTEE. The Management Committee shall cause the
Company to take the following action:
(i) at all times cause to be done all things necessary to maintain,
preserve and renew its existence and all material licenses, authorizations and
permits necessary to the conduct of its businesses;
(ii) maintain and keep its properties in good repair, working order and
condition, and from time to time make all necessary or desirable repairs,
renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times;
(iii) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon) and all claims for labor, materials or supplies which if unpaid
would by law become a lien upon any Company assets, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings
and adequate reserves (as determined in accordance with GAAP) have been
established on its books with respect thereto;
(iv) comply with all other material obligations which the Company incurs
pursuant to any contract or agreement, whether oral or written, express or
implied, as such obligations become due to the extent to which the failure to so
comply would reasonably be expected to have a Material Adverse Effect, unless
and to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in accordance with
GAAP) have been established on its books with respect thereto;
(v) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected to
have a Material Adverse Effect;
(vi) apply for and continue in force with good and responsible insurance
companies adequate insurance covering risks of such types and in such amounts as
are consistent with past practice and are customary for well-insured
corporations of similar size engaged in similar lines of business; and
(vii) maintain proper books of record and account which fairly present its
financial condition and results of operations and make provisions on its
financial statements for all such proper reserves as in each case are required
in accordance with GAAP.
5.4 LIABILITY FOR CERTAIN ACTS. Each representative to the Management Committee
shall have a fiduciary duty to the Members and shall perform his or her duties
in good faith, in a manner he or she reasonably believes to be in the best
interests of the Members, and with such care as an ordinarily prudent person in
a like position would use under similar circumstances. A representative who so
performs his or her duties shall not have any liability to the Company or its
Members by reason of being or having been a representative to the Management
Committee. The representatives to the Management Committee shall not be liable
to the Company or to any Member for any loss or damage sustained by the Company
or any Member, unless the loss or damage shall have been the result of fraud,
deceit, gross negligence or willful misconduct, or willful breach of this
Company Agreement by such representative.
5.5 MANAGEMENT COMMITTEE REPRESENTATIVES HAVE NO EXCLUSIVE DUTY TO COMPANY. No
representative to the Management Committee shall be required to manage the
Company as his or her sole and exclusive activity, and representatives may have
other business interests and may engage in other activities in addition to those
relating to the Company. Neither the Company nor any Member shall have any
right, by virtue of this Company Agreement, to share or participate in such
other interests or activities of such representatives or to the income or
proceeds derived therefrom. The representatives to the Management Committee
shall not incur any liability to the Company or to any of the Members solely as
a result of engaging in any other business or venture.
5.6 STANDARD OF CARE. The representatives to the Management Committee in the
discharge of their duties to the Company shall manage and operate the business
of the Company in a manner and for the purposes of maximizing its long- term
value and return to the Members. In discharging their duties, the
representatives to the Management Committee shall be fully protected in relying
in good faith upon the records required to be maintained under Article VII and
upon such information, opinions, reports or statements by the chief executive
officer of the Company, any of the Members or agents of the Company, or by any
other Person, as to matters such representatives reasonably believe are within
such other Person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Company, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits or losses of the Company or any other facts pertinent to
the existence and amount of assets from which distributions to Members might be
paid.
ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS
6.1 LIABILITY OF MEMBERS. The debts, obligations and liabilities (including, but
not limited to, strict liability) of the Company, whether arising in contract,
tort, under statute or otherwise, shall be solely the debts, obligations and
liabilities of the Company. No Member of the Company shall be obligated for any
such debt, obligation or liability solely by reason of being a Member. The
failure of the Company to observe any formalities or requirements relating to
the exercise of its powers or management of its business or affairs under this
Company Agreement or the Act shall not be grounds for imposing personal
liability on the Members for liabilities of the Company.
6.2 VOTING RIGHTS. All Members shall be entitled to vote on any matter submitted
to a vote of the Members. Unless the vote of a lesser or greater proportion or
number is otherwise required by the Act or this Company Agreement or unless the
consent of Members holding the AGM Interest is otherwise required by this
Company Agreement, the affirmative vote of one or more Members holding a
Majority of the SR Interest shall be the act of the Members. Unless required
under applicable law, Members who have an interest (economic or otherwise) in
the outcome of any particular matter upon which the Members vote or consent may
vote or consent upon any such matter and their vote or consent, as the case may
be, shall be counted in the determination of whether the requisite matter was
approved by the Members.
6.3 AGM MEMBER CONSENT. Notwithstanding anything in this Company Agreement to
the contrary, the Company shall not do any of the following acts, and the
Company will not permit any Subsidiary of the Company to do any of the following
acts, directly or indirectly, without the written consent of a Majority of the
AGM Interest:
(i) make any distributions upon any Membership Interest other than
distributions pursuant to the terms of Section 9.3;
(ii) purchase or otherwise acquire all or any portion of any
Membership Interest (including, without limitation, rights to acquire all or any
portion of any Membership Interest) other than the purchase of the AGM Interest
pursuant to Article XVII;
(iii) directly or indirectly, create, incur, assume, guarantee, have
outstanding, or otherwise become or remain directly or indirectly liable with
respect to, (i) any Consolidated Funded Debt or (ii) any Consolidated Current
Debt, except for (A) the CCC Loans (provided that at any time that the CCC Loans
are recourse to the Company, the Company will not have any CCC Loans outstanding
unless there shall have been during the immediately preceding twelve months a
period of at least 60 consecutive days on each day of which there shall have
been no CCC Loans outstanding in excess of $25,000,000) and (B) the Bank Loans,
provided that there shall have been during the immediately preceding twelve
months a period of at least 60 consecutive days on each day of which there shall
have been no Bank Loans outstanding in excess of $65,000,000;
(iv) declare, make or authorize any Investment except the following:
(1) Investments in direct obligations of the United States of
America or obligations fully guaranteed by the United States of America,
provided that such obligations mature within one year from the date acquired;
(2) Investments in certificates of deposit maturing within one year
from the date acquired and issued by a bank or trust company organized under the
laws of the United States or any or its states, rated AA or better by Standard
and Poor's Ratings Group, a division of McGraw Hill, Inc. or Aa2 or better by
Moody's Investors Service, Inc., and having capital, surplus and undivided
profits aggregating at least $750,000,000;
(3) Investments in commercial paper rated A1 by Standard and Poor's
Ratings Group, a division of McGraw Hill, Inc. or P1 by Moody's Investors
Service, Inc. and maturing not more than 270 days from the date acquired;
(4) loans and advances by the Company to its Subsidiaries;
(5) loans and advances (i) by Subsidiaries of the Company to the
Company and (ii) between Subsidiaries of the Company;
(6) travel and other business advances to officers and employees of
the Company or any Subsidiary of the Company in the ordinary course of business;
and
(7) other Investments not to exceed an aggregate amount of
$1,500,000;
(v) effect any Transfer except that:
(1) the Company or any of its Subsidiaries may Transfer assets in
the ordinary course of their business;
(2) any Subsidiary of the Company may merge with the Company or with
a Wholly-Owned Subsidiary of the Company, provided that the Company or such
Wholly-Owned Subsidiary shall be the survivor of such merger;
(3) any Subsidiary of the Company may Transfer its assets to the
Company or any Wholly-Owned Subsidiary of the Company;
(4) the Company may consolidate or merge with another corporation if
(i) the Company is the continuing or surviving company and (ii) immediately
before and after giving effect to such transaction, no breach of the Company
Agreement exists or would exist, and no amendment of the Company Agreement is
required; and
(5) the Company and any of its Subsidiaries may Transfer assets of
the Company or such Subsidiary, as the case may be, if all of the following
conditions shall have been satisfied with respect thereto: (i) such Transfer
does not involve a Substantial Part of the assets of the Company and its
Subsidiaries, (ii) in the good faith opinion of the Company, the Transfer is in
exchange for consideration with a Fair Market Value at least equal to that of
the property Transferred, and is in the best interests of the Company and its
Members and (iii) immediately before and after giving effect to such Transfer no
breach of the Company Agreement exists or would exist, and no amendment of the
Company Agreement is required;
No such Transfer of assets of the Company or any of its Subsidiaries shall have
the effect of releasing the Company or any of its Subsidiaries or any successor
corporation that shall theretofore have become such a successor corporation in
the manner prescribed in this Section 6.3(v) from any obligation to the Members
under the Company Agreement;
(vi) Transfer, or part with control of, any shares of stock (or
other equity interests) or Debt of any Subsidiary of the Company except (1) the
Company or any of its Subsidiaries may Transfer shares of stock (or other equity
interests) or Debt of any Subsidiary of the Company to the Company or a
Wholly-Owned Subsidiary of the Company and (2) the Company or any of its
Subsidiaries may Transfer all shares of stock (or other equity interests) and
all Debt of such a Subsidiary if (a) the Transfer is in exchange for cash
consideration with a Fair Market Value at least equal to that of the property
transferred (determined in good faith by the Management Committee of the
Company), (b) such Transfer is otherwise permitted under this Section 6.3 and
(c) at the time of such Transfer, such Subsidiary shall not own, directly or
indirectly, any shares of stock (or other equity interests) or Debt of any other
Subsidiary (unless all of the shares of stock (or other equity interests) and
Debt of such other Subsidiary owned, directly or indirectly, by the Company and
all Subsidiaries are simultaneously being sold). The Company will not issue any
membership interests other than the SR Interest and the AGM Interest;
(vii) engage in any business other than the production and sale of
sugar and by-products;
(viii) other than in connection with Bank Indebtedness, become
subject to any agreement or instrument which by its terms would (under any
circumstances) restrict the Company's ability to perform the provisions of the
Company Agreement (including, without limitation, provisions relating to payment
of distributions on and making acquisitions of the AGM Interest);
(ix) enter into directly or indirectly any transaction or Material
group of related transactions (including without limitation the purchase, lease,
sale or exchange of properties of any kind or the rendering of any service) with
any Affiliate, except (1) the Company may provide certain services to SRSC for
which SRSC shall pay the Company an amount up to $25,000 per month, (2) the
Company Agreement, the Formation Agreement and transactions contemplated by such
agreements, including without limitation the Company's purchase of sugarbeets
from SRSC, (3) in the ordinary course and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such Subsidiary, as the
case may be, than would be obtainable in a comparable arm's-length transaction
with a Person not an Affiliate, and (4) transactions between the Company and any
Subsidiary of the Company;
(x) permit any Subsidiary of the Company to incur or permit to exist
any restriction on such Subsidiary's ability to make payments or other
distributions to the Company or its Subsidiaries, to repay intra- company Debt
or to otherwise transfer earnings or assets to the Company or its Subsidiaries;
(xi) make or commit to make capital expenditures in an aggregate
amount exceeding $35,000,000 on a consolidated basis during any fiscal year and
the two previous fiscal years; provided, however, that (A) to the extent such
limit has been reached during any fiscal year, the Company and its Subsidiaries
may make capital expenditures reasonably required to be made in such fiscal year
by legal or regulatory requirements, (B) commencing with the Company's fiscal
year beginning on January 1, 1998 and on each January 1 thereafter, the $35
million aggregate threshold shall be adjusted by an amount equal to the change
since January 1, 1997 in the U.S. producer price index for refined beet sugar
(as shown on the most currently available publication) (or, if such index is no
longer available, the closest comparable U.S. producer price index available, as
reasonably determined by the Company), (C) the limitation set forth in this
Section 6.3(xi) shall not apply to capital expenditures which are financed with
Debt incurred by the Company specifically for the purpose of making such capital
expenditures, so long as such Debt is permitted to be incurred under this
Section 6.3, and (D) for purposes of this Section 6.3(xi), capital expenditures
for each fiscal year prior to January 1, 1997 shall be deemed to be an amount
equal to $10,000,000;
(xii) permit a court or governmental authority of competent
jurisdiction to enter an order appointing, without consent by the Company or any
Subsidiary of the Company, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or any
Subsidiary of the Company or the marshaling of its assets, or any such petition
shall be filed against the Company or any Subsidiary of the Company and such
petition shall not be dismissed within 60 days;
(xiii) permit the Company or any Subsidiary of the Company (1) to
generally not pay, or admit in writing its inability to pay, its debts as they
become due, (2) to file, or consent by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any jurisdiction,
(3) to make an assignment for the benefit of its creditors, (4) to consent to
the appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, (5) to be adjudicated as insolvent or to be liquidated, (6) to consent
to any other marshaling of its assets, (7) to take corporate action for the
purpose of any of the foregoing;
(xiv) permit a final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 to be rendered against one or more of the
Company, and its Subsidiaries and which judgments are not, within 60 days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay;
(xvii) (i) permit the payment of any principal of or premium or
interest on the Bank Indebtedness, any CCC Loan or any other Debt that is
outstanding to be accelerated according to its terms and declared due and
payable before its stated maturity or before its regularly scheduled dates of
payment, or (ii) as a consequence of the occurrence or continuation of any event
or condition (other than the passage of time or the right of the holder of Debt
to convert such Debt into equity interests), permit the Company or any
Subsidiary of the Company to become obligated to purchase or repay the Bank
Loans, such CCC Loan or such other Debt before its regular maturity or before
its regularly scheduled dates of payment; provided that in the case of Debt
other than the Bank Loans or any CCC Loan, the aggregate outstanding principal
amount thereof subject to clauses (i) and/or (ii) above is $1,000,000 or more;
(xviii) permit a Change Of Control Event to occur;
(xix) fail to preserve and keep in full force and effect the limited
liability company existence of the Company and all rights and franchises
(including, without limitation, licenses and permits) of the Company, and,
except as otherwise expressly provided by this Section 6.3, fail to at all times
preserve and keep in full force and effect the existence of each of its
Subsidiaries and all rights and franchises (including, without limitation,
licenses and permits) such Subsidiaries unless, in the good faith judgment of
the Company, the termination of or failure to preserve and keep in full force
and effect such existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect;
(xx) pay to SRSC any installment of the aggregate Beet Payment for
any crop year (other than the final installment) without withholding from such
installment an amount equal to a ratable portion of the aggregate Beet Payment
Reduction for such crop year, or pay to SRSC the final installment of the
aggregate Beet Payment for such crop year without withholding from such
installment an amount such that the aggregate amount of such withholdings for
such crop year will equal the aggregate Beet Payment Reduction for such crop
year;
(xxi) generate Distributable Cash in any Fiscal Year in the
aggregate amount of less than $26,697,372.00; or
(xxii) fail to impose Beet Payment Reductions for any crop year in
any Fiscal Year if the result of such failure would be that the Accrual would
exceed the Accrual Threshold at any month end.
6.4 REPRESENTATIONS AND WARRANTIES. - Each Member executing this Company
Agreement hereby represents and warrants to the Company and each other Member
that: (a) the Member, is an organization that it is duly organized, validly
existing and in good standing under the law of its state of organization; (b)
that it has full power and authority to execute and agree to this Company
Agreement and to perform its obligations hereunder; and (c) that the Member is
acquiring its interest in the Company for the Member's own account as an
investment and without an intent to distribute the interest. Each Member
acknowledges that its Membership Interest in the Company has not been registered
under the Securities Act of 1933 or any state securities laws, and may not be
resold or transferred by the Member without appropriate registration or the
availability of an exemption from such requirements.
6.5 INDEMNIFICATION. - The Company may, to the full extent permitted by law,
indemnify, defend and hold harmless any Person (or the estate of any Person) who
was or is a party to, or is threatened to be made a party to, a threatened,
pending or completed action, suit or proceeding, whether or not by or in the
right of the Company, whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such Person is or was a Member,
representative to the Management Committee, representative, officer, employee or
agent of the Company, or was serving at the request of the Company as manager,
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise, from and against any and
all claims, demands, liabilities (including, without limitation, strict
liability), losses, damages, costs or expenses (including attorneys' fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred by such Person in connection with such action, suit or proceeding. The
Company may, to the full extent permitted by law, purchase and maintain
insurance on behalf of any such Person against any liability which may be
asserted against him or her. Any expenses covered by the foregoing
indemnification may be paid by the Company in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the Persons seeking indemnification to repay such amounts if it is
ultimately determined that he or she is not entitled to be indemnified. The
indemnification provided in this Section 6.5 shall not be deemed to limit the
right of the Company to indemnify any other Person for any such expenses to the
full extent permitted by law, nor shall it be deemed exclusive of any other
rights to which any Person seeking indemnification from the Company may be
entitled under any agreement, vote of disinterested representatives to the
Management Committee or otherwise, both as to action in his, her or its official
capacity and as to action in another capacity while service as a Member,
representative, officer, employee or agent.
6.6 CONFLICTS OF INTEREST.
6.6.1 Members shall account to the Company and hold as trustee for it any
Company assets, profit or benefit derived by the Member, without the consent of
the Management Committee, in the conduct or winding up of the Company's business
or from a use or appropriation by such Member of Company assets or opportunity
including information developed exclusively for the Company and opportunities
expressly presented to the Company.
6.6.2 A Member does not violate a duty or obligation to the Company merely
because the Member's conduct furthers the Member's own interest. A Member may
lend money to and transact other business with the Company to the extent
permitted by this Company Agreement, but no Member is obligated to loan any
money to, or incur any financial obligations for the benefit of, the Company
except as provided by this Company Agreement. The rights and obligations of a
Member who lends money to or transacts business with the Company are the same as
those of a Person who is not a Member, subject to other applicable law. No
transaction with the Company shall be voidable solely because a Member has a
direct or indirect interest in the transaction if the transaction is either (i)
on terms no less favorable than would be available to the Company from an
unrelated third party or (ii) the Management Committee (and, if applicable under
Section 6.3, the consent of a Majority of the AGM Interest), knowing the
material facts of the transaction and the Member's interest, authorize, approve
or ratify the transaction.
6.6.3 Notwithstanding anything to the contrary in this Company Agreement,
the Members recognize that AGM's Affiliates have and anticipate having
substantial investments in a variety of industries that may compete with each
other. By virtue of AGM's investment in the Company, AGM intends to use
reasonable efforts to facilitate the Company's operations and other activities,
although the Members recognize and agree that such effort will not be to the
exclusion of effort by AGM's Affiliates to facilitate other similar and
dissimilar businesses. Nothing in this Company Agreement or otherwise will
restrict the ability of AGM's Affiliates to establish, acquire or retain an
interest in any business that may be deemed to compete with the Company. AGM and
its Affiliates shall not be obligated to present to the Company any particular
investment or business opportunity, regardless of whether such opportunity is of
a character that the Company could take advantage of if it were presented to the
Company.
6.7 OTHER PROVISIONS.
Promptly upon request, SRSC agrees to pay directly or to reimburse the Trust
(and, if paid by AGM, to reimburse AGM) for all expenses incurred by the Trust,
whether to compensate or reimburse the Resident Trustee of the Trust or
otherwise.
6.8 EXPRESS CONSENT TO FINANCING; OTHER MATTERS.
(a) Notwithstanding anything else to the contrary contained in this Company
Agreement, each of AGM, the Trust and SRSC expressly consent to the following,
which shall require no further consent of the Members:
(i) (A) the Trust's pledge of the AGM Interest to SRSC pursuant to
the terms of the SPT Pledge Agreement and the SPT Guaranty, and any rights and
proceeds with respect thereto as provided therein, (B) AGM's pledge of its
interest in the Trust to SRSC pursuant to the Snake River Pledge Agreement, and
any rights and proceeds with respect thereto as provided therein, (C) SRSC's
pledge of the SR Interest to the Agent pursuant to the terms of the NWFC Pledge
and Security Agreement, and any rights and proceeds with respect thereto as
provided therein, (D) the Company's pledge of the Plant Collateral to the Agent
pursuant to the terms of certain mortgages, deeds of trust, security agreements
and other instruments described in the Note Purchase Agreement, and any rights
and proceeds with respect thereto as provided therein, and (E) SRSC's pledge of
all of its rights in the SPT Pledge Agreement, the SPT Guaranty and the Snake
River Pledge Agreement to the Agent pursuant to the terms of the NWFC Pledge and
Security Agreement, and any rights and proceeds with respect thereto as provided
therein,;
(ii) in connection with and pursuant to the terms of each of the
documents, agreements and instruments referenced in Section 6.8(a)(i), (A) any
transfer or sale or foreclosure of the SR Interest, or any rights or proceeds
with respect thereto, from SRSC to the Agent, (B) any transfer, sale or
foreclosure of the AGM Interest from the Trust or AGM's Interest in the Trust,
or any rights or proceeds with respect thereto, to SRSC or to the Agent, (C) any
transfer, sale or foreclosure of the Plant Collateral, or any rights or proceeds
with respect thereto, from the Company to SRSC or to the Agent, and (D) any
subsequent transfer, sale or foreclosure of the AGM Interest, the SR Interest
and the Plant Collateral, or any rights or proceeds with respect thereto, by the
Agent to, or for the benefit of, any Person. Following any such transfer, sale
or foreclosure of the AGM Interest or the SR Interest, and upon the receipt by
the Company and the Remaining Members of written notice of such transfer
pursuant to the provisions of Section 11.2 of the Company Agreement and the
information and agreements referred to in Section 11.3.1, 11.3.2 and 11.3.4 of
the Company Agreement, the transferee in any such transfer or sale shall be
admitted as a Member of the Company without the need for any further consent of
the Members, and the provisions of Section 11.3.3 of the Company Agreement shall
not apply to any such transfer, sale or foreclosure.
(iii) the issuance of the Senior Notes by SRSC pursuant to the terms
of the Note Purchase Agreement, the use of proceeds as described therein and the
completion of all other transactions as contemplated by the Senior Notes and the
Note Purchase Agreement.
(iv) the provisions of the Deposit Trust Agreement, pursuant to
which, among other things, a portion of the Distributable Cash paid by the
Company to the Trust in respect of the AGM Interest is segregated by the
Resident Trustee and paid to the Agent for the benefit of the holders of the
Senior Notes and no distributions of Distributable Cash are made by the Resident
Trustee in any month to any Person prior to such segregation and distribution to
the Agent.
(b) Notwithstanding anything in the Company Agreement to the contrary, to
the extent that any provision of or action required by the Company Agreement is
inconsistent with or prohibited by the terms of the Note Purchase Agreement,
then until the Note Purchase Agreement is terminated, the terms of the Note
Purchase Agreement shall govern, provided, however, that without the consent of
the holders of the AGM Interest, no amendment, modification or other alteration
of the Note Purchase Agreement after October 14, 2005 shall be deemed to (i)
create any liability of, or increase any obligation of, the holders of the AGM
Interest, (ii) reduce any liability of, or decrease any obligation of, the
holders of the SR Interest, (iii) require any change in the governance
provisions of the Company Agreement, including without limitation the provisions
of the Company Agreement relating to the selection of the Management Committee,
the rights and responsibilities of representatives on the Management Committee,
or the voting rights of Members, (iv) change any provision of Section 6.3 of the
Company Agreement, (v) reduce or eliminate any rights of the holders of the AGM
Interest to receive information from the Company or SRSC, (vi) require any
change in the Capital Account of the holder of the AGM Interest, (vii) change
any provisions relating to distributions and allocations, (viii) require the
admission of any new member, the withdrawal of any Member or the dissolution of
the Company, (ix) change any provisions relating to the Put Option or the
mandatory redemption of the AGM Interest, and (x) provide for any discriminatory
treatment (including, without limitation, relating to distributions) between
Members not expressly permitted by the Company Agreement.
(c) The parties acknowledge and agree that until payment in full of the
Senior Notes pursuant to the terms of the Note Purchase Agreement, no Member
shall, without the prior written consent of all holders of the Senior Notes,
take any action or refrain from taking any action, either directly or
indirectly, if the effect of such action or failure to act would result in the
dissolution, liquidation or winding up of the Company.
(d) The parties acknowledge and agree that until payment in full of the
Senior Notes pursuant to the Note Purchase Agreement, the Trust will not take
any Control Action and will not take any enforcement action or exercise any
rights or remedies with respect to any breach of the Company Agreement (pursuant
to Article XVI or otherwise) without the prior consent of the Required
Purchasers, provided, however, that without such consent:
(i) the Trust may take any Control Action or take any enforcement
action or exercise any rights or remedies with respect to any breach of the
Company Agreement (pursuant to Article XVI or otherwise) so long as no Valhi
Default has occurred and is continuing and so long as such Control Action,
enforcement action or exercise of rights or remedies does not, and is not
reasonably likely to, result in (A) a failure of the Company to make scheduled
distributions of Distributable Cash (or estimated payments of Distributable
Cash) to any Member consistent with past practices or (B) a failure of any
Member to comply with the terms of the Deposit Trust Agreement;
(ii) the Trust may take action to enforce specific performance of
the provisions of the Company Agreement other than (x) any provision which
conflicts with any provisions of the Note Purchase Agreements or the Security
Documents or Valhi Obligation Security Documents, and (y) the provisions of
Section 6.3 except for Section 6.3(i), Section 6.3(ii) and 6.3(xxi); and
(iii) the Trust may take a Control Action if the unpaid Accrual
exceeds the Accrual Threshold or the Triggering Event giving rise to the ability
to exercise and continue a Control Action is a default under the provisions of
Article III, or Sections 6.3, 8.4.1, or 11.1 of the Company Agreement and, in
either case, (x) the Trust delivers to the Agent and SRSC a certificate executed
by two officers of the Company Trustee of the Trust certifying to such effect,
and (y) if more than 30 days has elapsed following written notice by or on
behalf of the Required Purchasers to the Trust, SRSC and the Agent of their
intention, following an SRSC Default, to exercise any remedies available to them
with respect to such SRSC Default (other than solely to cause the Agent to
exercise any voting rights it may have with respect to the AGM Interest), the
Trust takes a Control Action only after first obtaining written confirmation
from the Agent that no SRSC Default exists at the time such Control Action will
be taken and that Snake River has deposited with or delivered to the Agent
additional collateral for the Senior Notes in an amount and type that is
reasonably acceptable to the Agent and the holders of the Senior Notes in their
sole discretion.
(e) Notwithstanding anything in this Company Agreement to the contrary, the
parties agree that none of the following actions may be taken pursuant to this
Company Agreement while the Senior Notes are outstanding without the prior
written consent of the Agent and the Required Purchasers:
(i) any distribution pursuant to Section 9.3.1(b)(ii) or Section
9.3.1(b)(iii) if the effect of such distributions means that the Trust will not
receive, in any month, an amount that is less than the required payments of
interest and principal on the Senior Notes on the next date set for payment,
including without limitation any amounts then past due, (and if no such consent
of the Agent and Required Purchasers is obtained, then the provisions of Section
9.3.1(b)(ii) and/or Section 9.3.1(b)(iii), as applicable, will be disregarded
for purposes of application of Section 9.3.1);
(ii) the holder of the AGM Interest may not request a mandatory
redemption under Section 17.2 or exercise the Put Option pursuant to Article
XVIII unless and until SRSC has provided the Agent with assurances satisfactory
to the Agent and the holders of the Senior Notes that the Senior Notes will be
paid in full (including any make-whole amount or other amounts required under
the Note Purchase Agreement) as of the date of such redemption or purchase
pursuant to the Put Option;
(iii) if a Valhi Default has occurred and is continuing, the holders
of the AGM Interest may not exercise their rights under Article XIX without the
prior written consent of the Agent and the holders of the Senior Notes; and
(iv) if no Valhi Default has occurred and is continuing, the holders
of the AGM Interest may not exercise their rights under Article XIX without the
prior written consent of the Agent and the holders of the Senior Notes if the
exercise of such rights would, or would reasonably be likely to, result in (A) a
failure of the Company to make scheduled distributions of Distributable Cash (or
estimated payments of Distributable Cash) to any Member consistent with past
practices or (B) a failure of any Member to comply with the terms of the Deposit
Trust Agreement;
(f) The parties acknowledge that the Agent and the holders of the Senior
Notes are third party beneficiaries of the provisions of this Section 6.8 of the
Company Agreement.
ARTICLE VII
ACCOUNTING AND RECORDS
7.1 RECORDS TO BE MAINTAINED. The Management Committee shall maintain the
following records at the Principal Office:
7.1.1 A current list of the full name and last known business address of
each Member, former Member's and other holders of a Membership Interest;
7.1.2 A copy of the Articles and all amendments thereto, together with
executed copies of any powers of attorney pursuant to which Articles have been
executed;
7.1.3 Copies of the Company's federal, foreign, state and local income tax
returns and reports, if any;
7.1.4 Copies of this Company Agreement including all amendments thereto;
7.1.5 Any financial statements of the Company;
7.1.6 The general ledger and subsidiary ledgers of the Company; and
7.1.7 Employee benefit and benefit plan records.
7.2 REPORTS.
7.2.1 At least 30 days but not more than 90 days prior to the beginning of
each Fiscal Year, the chief executive officer or other designated officer of the
Company (acting under the supervision of the chief executive officer) shall
prepare for the approval by the Management Committee and deliver to the Members
an annual business plan ("Annual Operating Plan"). The initial Annual Operating
Plan, for the Fiscal Year ending December 31, 1997, shall be prepared and
delivered to the Members within 15 days after the Effective Date. Each Annual
Operating Plan shall consist of a strategic plan setting forth the Company's
goals and objectives regarding the operation and growth of the Company's
business during the next Fiscal Year, a description of the methods for
accomplishment of these goals and objectives, the Company's expense budget,
market approach and plan for development and closure of opportunities; and
projected financial statements of the Company for such period (such statements
to include a projected balance sheet, income statement and cash flow statement).
The Annual Operating Plan shall also include such other information or other
matters requested by the Management Committee necessary in order to enable the
Management Committee to make an informed decision with respect to its approval
of such Annual Operating Plan.
7.2.2 In addition, the chief executive officer shall provide the Management
Committee and deliver to the Members the following information:
(a) as soon as available but in any event within 30 days after the end of
each monthly accounting period in each Fiscal Year (including the last month of
the Fiscal Year), unaudited consolidated statements of income of the Company for
such monthly period and for the period from the beginning of the Fiscal Year to
the end of such month, and balance sheet of the Company as of the end of such
monthly period, setting forth in each case comparisons to the corresponding
period in the preceding Fiscal Year, and all such statements shall be prepared
in accordance with GAAP, subject to the absence of footnote disclosures and to
normal year-end adjustments;
(b) as soon as available but in any event within 45 days after the end of
the first three quarterly accounting periods in each Fiscal Year, unaudited
consolidated statements of income and cash flows of the Company for the period
from the beginning of the Fiscal Year to the end of such quarter, and
consolidated balance sheets of the Company as of the end of such quarterly
period, setting forth in each case comparisons to the corresponding period in
the preceding Fiscal Year, and all such statements shall be prepared in
accordance with GAAP, subject to the absence of footnote disclosures and to
normal year-end adjustments;
(c) within 90 days after the end of each Fiscal Year, consolidated
statements of income and cash flows of the Company for such Fiscal Year, and
consolidated balance sheets of the Company as of the end of such Fiscal Year,
setting forth in each case comparisons to the preceding Fiscal Year, all
prepared in accordance with GAAP, and accompanied by an opinion containing no
exceptions or qualifications (except for qualifications regarding specified
contingent liabilities and exceptions relating to the adoption of new accounting
standards with which the independent accounting firm concurs) of an independent
accounting firm reasonably acceptable to all Members;
(d) at least 30 days but not more than 90 days prior to the beginning of
each Fiscal Year, an annual budget prepared on a quarterly basis for the Company
for such Fiscal Year (displaying anticipated statements of income and cash flows
and balance sheets), and promptly upon preparation thereof any other significant
budgets prepared by the Company and any revisions of such annual or other
budgets;
(e) promptly (but in any event within five Business Days) after the
discovery, or receipt of notice, of (i) any Triggering Event, (ii) any default
under any material agreement to which the Company is a party or (iii) any other
material adverse event or circumstance affecting the Company (including the
filing of any material litigation against the Company or the existence of any
dispute with any Person which involves a reasonable likelihood of such
litigation being commenced), an officer's certificate specifying the nature and
period of existence thereof and what actions the Company has taken and propose
to take with respect thereof;
(f) within ten days after transmission thereof, copies of all press
releases and other statements made available generally by the Company to the
public concerning material developments in the Company's businesses;
(g) as soon as available but in any event no later than November 15th of
each year, a calculation of the aggregate Beet Payments relating to the crop
year ended on the immediately preceding September 30th, the actual amounts paid
by the Company for sugarbeets with respect to such crop year, any Beet Payment
Reduction with respect to such crop year and any Excess Beet Payments with
respect to such crop year;
(h) the notices required by Section 9.3, at the times set forth in Section
9.3, and promptly, within five days of any payment, a calculation of any amounts
paid as cash distributions or advances to Members, in each case showing such
amounts for the month then ended and for the Fiscal Year;
(i) in a timely manner, subject to Section 10.4, those information returns
required by the Code and the laws of any state and with information concerning
the Company's income, gain, loss, deduction or credit when relevant to reporting
a Member's or Assignee's share of such items for Federal or state tax purposes;
and
(j) with reasonable promptness, such other information and financial data
concerning the Company as any holder of the AGM Interest may reasonably request
(including without limitation information relating to the Company's employee
benefits and benefit plans), which information shall not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make such information not misleading.
Each of the financial statements referred to in Sections 7.2.2 (a), (b) and (c)
above shall be true and correct in all material respects as of the dates and for
the periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none of
which would, alone or in the aggregate, be materially adverse to the financial
condition, operating results, assets, operations or business prospects of the
Company taken as a whole).
7.2.3 The Company shall permit any representatives designated by any holder
of the AGM Interest, for a purpose reasonably related to such holder's interest
as a holder of the AGM Interest, upon reasonable notice and during normal
business hours and such other times as any such holder may reasonably request,
to (a) visit and inspect any of the properties of the Company, (b) examine the
financial and other records of the Company and make copies thereof or extracts
therefrom and (c) discuss the affairs, finances and accounts of the Company with
the Management Committee, representatives, officers, key employees and
independent accountants of the Company. The presentation of a copy of this
Company Agreement containing this Section 7.2.3, certified by the Chief
Executive Officer or Secretary of the Company, by any such holder to the
Company's independent accountants shall constitute the Company's written
permission to its independent accountants to participate in discussions with
such representatives.
7.3 ADDITIONAL COPIES. The Company agrees that it shall provide copies of all
reports and information required to be provided to the holder of the AGM
Interest to each of the Trust and AGM.
ARTICLE VIII
CONTRIBUTIONS AND CAPITAL ACCOUNTS
8.1 MEMBERS' CAPITAL CONTRIBUTION. AGM and SRSC contributed such assets and
amounts as is set forth in APPENDIX A as their respective Initial Capital
Contributions. Upon Closing (as defined in the Formation Agreement), AGM and
SRSC received their respective Membership Interest. The Initial Capital
Contributions shall have the value set forth on APPENDIX A. No interest shall
accrue on any Capital Contribution.
8.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
8.2.1 Except as provided in Section 8.2.2 or Section 9.3, no Member shall
be required to make any Capital Contributions other than the Initial Capital
Contributions, and no Member shall have the obligation to fund operating
deficits nor have the obligation to loan, invest or otherwise provide any funds
to the Company. Any amounts distributed to Members pursuant to Section 9.3 shall
be promptly recontributed to the Company if it is determined subsequent to the
distribution that the distribution was not in accordance with this Company
Agreement.
8.2.2 If Valhi makes any principal payment to SRSC on the Valhi Loans, then
each holder of the SR Interest shall contribute to the Company, simultaneously
with such principal payment, a pro rata portion (such pro rata portion to be
equal to the portion of the SR Interests held by each such holder) of the
aggregate amount of such principal payment. The Company and SRSC hereby instruct
Valhi to make any such principal payment directly to the Company. The provisions
of this Section 8.2.2 shall not apply if the Company has previously redeemed in
full all of the AGM Interest pursuant to Article XVII or if the holders of the
AGM Interest have received full payment upon exercise of the Put Option granted
pursuant to Article XVIII.
8.3 CAPITAL ACCOUNTS.
8.3.1 A separate Capital Account will be maintained for each Member and
Assignee. The respective Capital Accounts of each Member and Assignee will be
increased by (1) the amount of money contributed by such Member to the Company;
(2) the Gross Asset Value of Property contributed by such Member or Assignee to
the Company (net of liabilities secured by such contributed Property that the
Company is considered to assume or take subject to, as provided by Section 752
of the Code); (3) allocations to such Member or Assignee of Net Profits; and (4)
any items in the nature of income and gain which are specially allocated to the
Member or Assignee pursuant to Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4, 9.2.5 or
9.2.9. The Capital Account of each Member or Assignee will be decreased by (1)
the amount of money distributed to such Member or Assignee by the Company; (2)
the Gross Asset Value of Property distributed to such Member or Assignee by the
Company (net of liabilities secured by such distributed Property that such
Member or Assignee is considered to assume or take subject to, as provided by
Section 752 of the Code); (3) any items in the nature of deduction and loss
which are specially allocated to the Member or Assignee pursuant to Sections
9.2.1, 9.2.2, 9.2.3, 9.2.4, 9.2.5 or 9.2.9; and (4), allocations of Net Losses.
8.3.2 In the event of a permitted sale or exchange of a Membership Interest
in the Company, the Capital Account of the transferor shall become the Capital
Account of the transferee to the extent it relates to the transferred Membership
Interest in accordance with Section 1.704-l(b)(2)(iv)(l) of the Regulations.
8.3.3 The manner in which Capital Accounts are to be maintained pursuant to
this Section 8.3 is intended to comply with the requirements of Section 704(b)
of the Code and the Regulations promulgated thereunder. If, in the opinion of
the Company's accountants, the manner in which Capital Accounts are to be
maintained pursuant to the preceding provisions of this Section 8.3 should be
modified in order to comply with Section 704(b) of the Code and the Regulations
thereunder, then notwithstanding anything to the contrary contained in the
preceding provisions of this Section 8.3, the method in which Capital Accounts
are maintained shall be so modified; provided, however, that any change in the
manner of maintaining Capital Accounts shall not materially alter the economic
agreement between or among the Members and Assignees.
8.3.4 Except as otherwise required in the Act, no Member or Assignee shall
have any liability to restore all or any portion of a deficit balance in such
Member's or Assignee's Capital Account.
8.4 WITHDRAWAL OR REDUCTION OF MEMBERS' CONTRIBUTIONS.
8.4.1 Without the consent of both a Majority of the SR Interest and a
Majority of the AGM Interest, no Member or Assignee shall receive out of the
Company assets any part of its Capital Contribution until all liabilities of the
Company, except liabilities to Members on account of their Capital
Contributions, have been paid or there remains Company assets sufficient to pay
them.
8.4.2 A Member, irrespective of the nature of its Capital Contribution, has
only the right to demand and receive cash in return for its Capital
Contribution; provided, however, no Member or Assignee shall be entitled to a
repayment, return or withdrawal of any part of such Member's or Assignee's
Capital Contribution, or similar distribution, except as provided in this
Company Agreement.
ARTICLE IX
ALLOCATIONS AND DISTRIBUTIONS, ELECTIONS AND REPORTS
9.1 ALLOCATION OF PROFITS AND LOSSES. Subject to Article XIX of this Company
Agreement, and except as otherwise set forth in Section 9.2:
9.1.1 Allocations of Profits from Operations. For any Fiscal Year or other
taxable period, the Net Profits of the Company from sources other than a Major
Capital Event shall be allocated as follows:
(a) First, in an amount up to the net cash distributed to the Members for
the Fiscal Year as to which Net Profits are being allocated, among the Members
in proportion to the net cash paid to each;
(b) Second, to those Members with a negative Capital Account balance at the
beginning of the Fiscal Year as to which Net Profits are being allocated, in
proportion to such negative Capital Account balances until the Capital Account
balances of all such Members would be equal to zero; and
(c) Third, to the Members in the proportions then in effect as set forth in
Section 9.3.1(b)(iv).
9.1.2 Allocation of Income or Gain from a Major Capital Event. Any income
or gain realized by the Company from a Major Capital Event shall be allocated as
follows:
(a) First, subject to adjustment as hereafter provided, an amount equal to
the cash to be distributed as a result of such transaction shall be allocated to
those Members who will be distributed such cash pursuant to Section 9.3.2;
(b) Second, if the cash distributed exceeds the gain from the Major Capital
Event, the amount tentatively allocated pursuant to Section 9.1.2(a) to Members
with a positive Capital Account balance (determined after the tentative
allocation provided for in Section 9.1.2(a) above) shall be reduced in
proportion to the positive balances of the Capital Accounts of all Members
having positive Capital Account balances immediately prior to the allocation
provided from in Section 9.1.2(a) above until the total amount allocated equals
the total gain from such Major Capital Event to be allocated; provided, that the
amount of reduction for any Member shall not exceed the total amount allocated
to all Members under Section 9.1.2(a) and, any excess reduction shall be
allocated among the remaining Members in the same manner as otherwise provided
in this Section 9.1.2(b);
(c) Third, to the Members with negative Capital Account balances
(determined prior to the allocation set forth in Section 9.1.2(a)) in proportion
to the negative balances of such Capital Accounts until the Capital Account
balances of all such Members equal zero;
(d) Fourth, to the Members in the percentages then in effect as set forth
in Section 9.3.1(b)(iv); and
(e) If some Members have negative Capital Accounts and some have positive
Capital Accounts immediately prior to the allocation provided for in Section
9.1.2(a), the amount of gain allocable to the Members with positive Capital
Accounts pursuant to this Section shall be reduced in proportion to their
positive balances in an amount not to exceed the lesser of the aggregate
positive Capital Account balances of such Members, or the aggregate negative
Capital Account balances of other Members, and such amount of gain shall instead
be allocated to the Members with negative Capital Account balances in proportion
to their negative balances.
9.1.3 Allocation of Losses. Losses shall be allocated among all the Members
in accordance with their respective Capital Interest.
9.1.4 Recapture. Any recapture of depreciation or investment tax credits
shall be allocated to the Members who were previously allocated such
depreciation or tax credits.
9.2 SPECIAL ALLOCATIONS TO CAPITAL ACCOUNTS AND CERTAIN OTHER INCOME TAX
ALLOCATIONS.
9.2.1 In the event any Member or Assignee receives any adjustments,
allocations, or distributions described in Sections 1.704-l(b)(2)(ii)(d)(4),
(5), or (6) of the Regulations, which unexpectedly create or increase a Deficit
Capital Account of such Member, then items of Company income and gain
(consisting of a pro rata portion of each item of Company income, including
gross income, and gain for such year and, if necessary, for subsequent years)
shall be specially allocated to such Member or Assignee in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Deficit
Capital Account so created as quickly as possible. It is the intent that this
Section 9.2.1 be interpreted to comply with the alternate test for economic
effect set forth in Section 1.704-l(b)(2)(ii)(d) of the Regulations.
9.2.2 In the event any Member or Assignee would have a Deficit Capital
Account at the end of any Company taxable year, the Capital Account of such
Member shall be specially credited with items of income (including gross income)
and gain in the amount of such excess as quickly as possible.
9.2.3 Notwithstanding any other provision of this Section 9.2, if there is
a net decrease in the Company Minimum Gain as defined in either Regulation
Section 1.704-2(d) or in the definition of Member Minimum Gain during a taxable
year of the Company, then the Capital Accounts of each Member or Assignee shall
be allocated items of income (including gross income) and gain for such year
(and if necessary for subsequent years) equal to that Member's or Assignee's
share of the net decrease in Company Minimum Gain or Member Minimum Gain, as
applicable. This Section 9.2.3 is intended to comply with the minimum gain
chargeback requirement of Section 1.704-2 of the Regulations and shall be
interpreted consistently therewith. If in any taxable year that the Company has
a net decrease in the Company Minimum Gain or there is a net decrease in Member
Minimum Gain, if the minimum gain chargeback requirement would cause a
distortion in the economic arrangement among the Members and Assignees and it is
not expected that the Company will have sufficient other income to correct that
distortion, the Management Committee may in its discretion (and shall, if
requested to do so by a Member) seek to have the Internal Revenue Service waive
the minimum gain chargeback requirement in accordance with Regulation Section
1.704-2(f)(4).
9.2.4 Items of Company loss, deduction and expenditures described in
Section 705(a)(2)(B) which are attributable to any nonrecourse debt of the
Company are characterized as partner (Member) nonrecourse deductions under
Section 1.704-2(i) of the Regulations and shall be allocated to the Members'
Capital Accounts in accordance with Section 1.704-2(i) of the Regulations.
9.2.5 Beginning in the first taxable year in which there are allocations of
nonrecourse deductions (as described in Section 1.704-2(b) of the Regulations)
such deductions shall be allocated to the Members or Assignees in the same
manner as Net Profits or Net Losses are allocated for such period.
9.2.6 In accordance with Section 704(c)(1)(A) of the Code and Section
1.704-l(b)(2)(I)(iv) of the Regulations, if a Member or Assignee contributes
Property with a Gross Asset Value that differs from its adjusted basis at the
time of contribution, income, gain, loss and deductions with respect to the
Property shall, solely for federal income tax purposes (and not for Capital
Account purposes), be allocated among the Members and Assignees so as to take
account of any variation between the adjusted basis of such Property to the
Company and its fair market value at the time of contribution in accordance with
Section 1.704-3(b)(i) of the Regulations; provided, however, that the gain from
the sale of contributed Property shall be allocated first to the contributing
Member to the extent necessary to offset the effect of the ceiling rule
limitation under Section 1.704-3(b)(1) of the Regulations.
9.2.7 In the case of any distribution of Property other than money by the
Company to a Member or Assignee, such Member or Assignee shall, solely for
federal income tax purposes (and not for Capital Account purposes), be treated
as recognizing gain in an amount equal to the lesser of:
(a) the excess (if any) of (A) the fair market value of the Property
received in the distribution over (B) the adjusted basis of such Member's or
Assignee's Membership Interest immediately before the distribution reduced (but
not below zero) by the amount of money received in the distribution; or
(b) the Net Precontribution Gain (as defined below in accordance with
Section 737(b) of the Code) of the Member or Assignee. The Net Precontribution
Gain means the net gain (if any) which would have been recognized by the
distributee Member or Assignee under Section 704(c)(1)(B) of the Code of all
Property which (1) had been contributed to the Company within five years of the
distribution, and (2) is held by the Company immediately before the
distribution, had been distributed by the Company to another Member or Assignee.
If any portion of the Property distributed consists of Property which had been
contributed by the distributee Member or Assignee to the Company, then such
Property shall not be taken into account under this Section 9.2.7 and shall not
be taken into account in determining the amount of the Net Precontribution Gain.
If the Property distributed consists of an interest in an organization, the
preceding sentence shall not apply to the extent that the value of such interest
is attributable to the Property contributed to such organization after such
interest had been contributed to the Company.
9.2.8 All recapture of income tax deductions resulting from sale or
disposition of Company Property shall be allocated to the Member(s) or
Assignee(s) to whom the deduction that gave rise to such recapture was allocated
hereunder to the extent that such Member or Assignee is allocated any gain from
the sale or other disposition of such Property.
9.2.9 Any credit or charge to the Capital Accounts of the Members or
Assignees pursuant to Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4 and/or 9.2.5 hereof
shall be taken into account in computing subsequent allocations of Net Profits
and Net Losses pursuant to Section 9.1, so that the net amount of any items
charged or credited to Capital Accounts pursuant to Sections 9.1 and 9.2.1,
9.2.2, 9.2.3, 9.2.4 and/or 9.2.5 shall to the extent possible, be equal to the
net amount that would have been allocated to the Capital Account of each Member
or Assignee pursuant to the provisions of this Article IX if the special
allocations required by Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4 and/or 9.2.5 hereof
had not occurred.
9.3 DISTRIBUTIONS. Subject to Article XIX and Section 6.8 of this Company
Agreement, and commencing with the Company's 1997 Fiscal Year, the Company shall
make distributions of cash to its Members in accordance with the following:
9.3.1 On or before the first day of each calendar month, commencing with
January 1, 1997, the Company shall make a good faith estimate of Distributable
Cash for the then current Fiscal Year and provide written notice of such
estimate to each Member.
(a) On or before the 15th day of each calendar month, commencing with
January 1997, the Company shall distribute to its Members cash in an aggregate
amount equal to the lesser of (i) the product of (A) the Company's estimated
Distributable Cash for such Fiscal Year (based on the Company's estimate as of
the first day of such month) times (B) a fraction, the numerator of which is the
number of calendar months which have commenced in the current Fiscal Year
(including the current month) and the denominator of which is 12, and (ii) the
sum of (A) the product of $2,224,781 times the number of calendar months which
have commenced in the current Fiscal Year (including the current month), plus
(B) any unpaid Accrual as of the beginning of such Fiscal Year; and, in each
case set forth in (i) or (ii) above, less the aggregate amount actually
distributed to Members pursuant to this Section 9.3.1(a) for each prior month of
the current Fiscal Year. Such distributions shall be in the following
percentages: 95% to the holders of the AGM Interest and 5% to the holders of the
SR Interest.
(b) Within 10 days following the completed audit of the books of the
Company for each Fiscal Year commencing with Fiscal Year 1997, the Company will
determine its actual Distributable Cash for such Fiscal Year and provide written
notice of such determination to each Member. If the Company's actual
Distributable Cash for such Fiscal Year (based on such audit) exceeds amounts
previously distributed to Members for such Fiscal Year pursuant to Section
9.3.1(a) above, then, within 30 days following such audit, the Company shall
distribute to its Members cash in an aggregate amount equal to 100% of such
actual Distributable Cash for such Fiscal Year (based on the Company's audit)
less amounts actually distributed pursuant to Section 9.3.1(a) above. Such
distributions shall be paid in the following percentages and priority:
(i) 95% to the holders of the AGM Interest and 5% to the holders of the SR
Interest, until the Members have received, pursuant to this Section 9.3.1(b)(i)
and Section 9.3.1(a), cash distributions for such Fiscal Year in an aggregate
amount equal to the lesser of (A) the Company's Distributable Cash for such
Fiscal Year and (B) $26,697,372 plus any unpaid Accrual as of the beginning of
such Fiscal Year, and
(ii) next, 100% to the holders of the SR Interests for Fiscal Year 1997,
and thereafter 100% to the holders of the SR Interests until such holders have
received an aggregate amount equal to the aggregate Beet Payment Reductions
actually withheld by the Company since October 14, 2005 (and, for periods
between January 1, 1997 and October 13, 2005, the equivalent thereof), net of
the aggregate amount of cash used by SRSC since January 1, 1997 to reduce the
amount of the Beet Payment Reduction that was actually withheld from the
aggregate amount paid by SRSC to its members for the purchase of sugarbeets that
were sold by SRSC to the Company.
(iii) next, 20% to the holders of the AGM Interest and 80% to the holders
of the SR Interest until the holders of the AGM Interest have received an
aggregate amount equal to the dollar amount calculated by subtracting the amount
of interest actually accrued on that certain indebtedness owed by SRSC to Valhi
pursuant to the terms of that certain subordinated loan agreement dated as of
May 14, 1997, as amended (the "SRSC Subordinated Debt") from April 1, 2000 from
the interest which otherwise would have accrued on the SRSC Subordinated Debt
from April 1, 2000 absent the amendments to the terms of the SRSC Subordinated
Debt dated October 19, 2000 and October 14, 2005; and
(iv) next, 5% to the holders of the AGM Interest and 95% to the holders of
the SR Interest for the Company's 1997 Fiscal Year through and including the
2002 Fiscal Year, or 10% to the holders of the AGM Interest and 90% to the
holders of the SR Interest, for the Company's 2003 Fiscal Year and thereafter.
To the extent the amounts distributed to the Members pursuant to Section
9.3.1(a) above exceed the Company's actual Distributable Cash for such Fiscal
Year (based on the Company's audit), the Members shall be obligated to return to
the Company, within 10 days following the completed audit of the books of the
Company, an amount of cash equal to any excess of the aggregate amount actually
distributed during such Fiscal Year to each Member (pursuant to Section 9.3.1(a)
above) over such Member's respective share of the Company's actual Distributable
Cash. The parties agree that, in the event any Member of the Company is
obligated to return any amounts pursuant to the provisions of this Section
9.3.1(b), the Company may, at its option, withhold such amounts from amounts to
be distributed to such Member pursuant to Section 9.3.1 or otherwise, provided,
however, that in the case of the AGM Interest held by the Trust, the Company
shall not withhold an amount which would cause the Trust to receive an amount,
in any month, that is less than the scheduled payment of principal and interest
on the Senior Notes for such month.
(c) Notwithstanding the foregoing, any distribution to the holders of the
SR Interest pursuant to this Section 9.3.1 will be reduced by any Excess Beet
Payment made during such Fiscal Year (based upon final distribution of the Beet
Payment), and any Excess Beet Payment made during such Fiscal Year will, for
purposes of this Section 9.3.1, be treated as if distributed in cash to the
holders of the SR Interest ratably at the times and in the manner set forth in
Section 9.3.1(a).
(d) Amounts distributed to the holders of the AGM Interest pursuant to the
provisions of Sections 9.3.1(a) and 9.3.1(b)(i) shall be considered "preferred
returns" for purposes of Section 1.707-4(a)(3) of the Regulations.
9.3.2. Except as provided below, the Company shall distribute any
Distributable Cash from a Major Capital Event, (i) first, to the Members in an
amount equal to any unpaid Accrual, 95% to the holders of the AGM Interest and
5% to the holders of the SR Interest, (ii) second, to the Members pro rata in
accordance with their Sharing Ratios, until each Member has received an amount
under this Section 9.3.2 equal in the aggregate to the Capital Contribution made
by each Member, and (iii) third, to the Members in the percentages then in
effect under Section 9.3.1(b)(iv).
Notwithstanding anything to the contrary in this Section 9.3.2, if a Major
Capital Event is incident to or results in the liquidation of the Company,
Distributable Cash therefrom shall be distributed in accordance with Section
13.3.
9.3.3 No distribution shall be declared and paid unless, after the
distribution is made, the fair value of assets of the Company are in excess of
all liabilities of the Company and the Company will not be rendered insolvent
within the meaning of UCC Section1-201(23).
9.3.4 The parties acknowledge and understand that, pursuant to the Deposit
Trust Agreement, any distribution paid in respect of the AGM Interest shall be
paid to the Trust.
9.3.5 The parties acknowledge and understand that, pursuant to the Deposit
Trust Agreement, immediately upon any Retained Amount being accrued, the Trust
will distribute to its beneficiaries all rights of the holders of the AGM
Interest to receive any Retained Amounts, and, accordingly, the pledge of the
AGM Interest pursuant to the SPT Pledge Agreement does not include a pledge of
any rights held by the holders of the AGM Interest to receive any Retained
Amounts accrued prior to the date of any Valhi Default or SRSC Default. Prior to
any Valhi Default or SRSC Default, the Company may pay amounts in respect of
Retained Amounts pursuant to the provisions of this Section 9 of the Company
Agreement. Following any Valhi Default or SRSC Default which is continuing, each
of AGM, the Trust and SRSC agree that no amounts shall be paid in respect of any
Retained Amounts, except as may otherwise be approved by the holders of the
Senior Notes. .
9.4 ACCOUNTING PRINCIPLES. The profits and losses of the Company for Income Tax
purposes shall be determined in accordance with accounting principles applied on
a consistent basis using the accrual method of accounting. It is intended that
the Company will elect those accounting methods for federal income tax purposes
which provide the Members with the greatest income tax benefits.
ARTICLE X
TAXES
10.1 ELECTIONS. Except as otherwise provided in this Company Agreement, the
Management Committee may make any tax elections for the Company allowed under
the Code or the tax laws of any state or other jurisdiction having taxing
jurisdiction over the Company, provided that the Management Committee shall
first provide reasonable written notice of any proposed tax election to each
Member and shall provide each Member with an opportunity to comment on such
proposed election.
10.2 TAXES OF TAXING JURISDICTIONS. All amounts withheld pursuant to the Code or
any provisions of any state or local tax law with respect to any distribution to
the Members shall be treated as amounts distributed in cash to the Members
pursuant to Section 9.3 for all purposes under this Agreement. The Management
Committee may, where permitted by the rules of any taxing jurisdiction, file a
composite, combined or aggregate tax return reflecting the income of the Company
and pay the tax, interest and penalties of some or all of the Members on such
income to the taxing jurisdiction, in which case the Company shall inform each
Member of the amount of such tax interest and penalties so paid.
10.3 TAX MATTERS PARTNER. SRSC shall serve as the initial "tax matters partner"
pursuant to Section 6231(a)(7) of the Code. The Management Committee may
designate another Member as the "tax matters partner" of the Company. Any Member
designated as tax matters partner shall take such action as may be necessary to
cause each other Member to become a notice partner within the meaning of Section
6223 of the Code. Any Member who is designated tax matters partner may not take
any action contemplated by Sections 6222 through 6232 of the Code without the
consent of the other Members. SRSC shall have the authority to represent the
Company in all audits or other administrative proceedings with state or local
taxing authorities subject to the same limits, notice requirements and approval
requirements imposed on SRSC in its capacity as "tax matters partner" under this
Section 10.3.
10.4 TAX RETURNS. The "tax matters partner" shall cause all necessary federal,
state and local income tax returns to be timely prepared and filed and shall
furnish to each Member and Assignee a copy of any proposed return not less than
30 days prior to filing for the purpose of providing each Member and Assignee an
opportunity to review such return and to discuss with the "tax matters partner"
the appropriate treatment of any items of issues relevant to such return.
ARTICLE XI
DISPOSITION OF MEMBERSHIP INTERESTS
11.1 GENERAL. Neither a Member nor an Assignee shall have the right to Dispose,
except in the case of bankruptcy, all or any part of its Membership Interest to
any Person, without the consent of the other Members which consent may be
withheld in the absolute discretion of such non-transferring Members. Each
Member and Assignee hereby acknowledges the reasonableness of the restrictions
on sale and gift of the Membership Interests imposed by this Company Agreement
in view of the Company's purposes and the relationship among the Members and
Assignees. Notwithstanding the foregoing, any Membership Interest may be
transferred, sold or otherwise Disposed pursuant to the provisions of Section
6.8. Accordingly, the restrictions on Disposition contained herein, other than
any transfer, sale or Disposition pursuant to the provisions of Section 6.8,
shall be specifically enforceable.
SRSC and the Company have consented to the transfer of the AGM Interest from AGM
to the Trust and to the admission of the Trust as a Member of the Company, and
the parties have agreed to waive the requirement set forth in Section 11.3.1 of
the Company Agreement that the Trust provide a legal opinion in connection with
such transfer. The Company agrees that it has received from the Trust all
information and agreements required pursuant to Section 11.3.2 of the Company
Agreement.
11.2 REQUIREMENTS OF TRANSFER. No Disposition of a Membership Interest in the
Company shall be effective unless and until written notice (including the name
and address of the proposed transferee or donee and the date of such
Disposition) has been provided to the Company and the non-transferring Members.
11.3 DISPOSITION. Any Member or Assignee may Dispose of all or a portion of the
Member's or Assignee's Membership Interest upon compliance with this Article XI.
In addition to the other requirements of this Article XI, no Membership Interest
shall be Disposed of:
11.3.1 without an opinion of counsel satisfactory to the Management
Committee that such assignment is subject to an effective registration under, or
exempt from the registration requirements of, the applicable state and federal
securities laws;
11.3.2 unless and until the Company receives from the Assignee the
information and agreements that the Management Committee may reasonably require,
including but not limited to any taxpayer identification number and any
agreement that may be required by any taxing jurisdiction;
11.3.3 without the consent of all Members if such Disposition when added to
the total of all other Dispositions within the preceding twelve (12) months
would result in the Company being considered to have terminated within the
meaning of Code section 708; and
11.3.4. unless and until the Company receives from the Assignee its written
agreement to be bound by and subject to the terms hereof.
11.4 TRANSFEREE NOT MEMBER IN ABSENCE OF CONSENT. Notwithstanding anything
contained in this Agreement to the contrary, if any proposed assignment of the
transferring Member's Membership Interest to an Assignee which is not a Member
is not unanimously approved by the Members (which approval may be withheld in
the absolute discretion of the Members), then the Assignee shall have no right
to participate in the management of the business and affairs of the Company or
to become a Member. In the event that an Assignee does not become a Member of
the Company, the Assigning Member shall retain all rights to participate in the
management of the business and the affairs of the Company, including all Member
voting rights and all other rights not transferred to Assignee, and the
Assigning Member shall be entitled to exercise all such rights on its own behalf
or on behalf of the Assignee to the same extent as prior to any such transfer.
11.5 DISPOSITIONS NOT IN COMPLIANCE WITH THIS ARTICLE VOID. Any attempted
Disposition of a Membership Interest, or any part thereof, not in compliance
with this Article XI shall be, and is declared to be, null and void ab initio.
ARTICLE XII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Any Person may become a Member of this Company upon (i) the unanimous consent of
the Members or (ii) pursuant to Article XI as an Assignee of a Member's Interest
or any portion thereof, subject to the terms and conditions of this Company
Agreement. No new Members shall be entitled to any retroactive allocation of
losses, income, expenses or deductions incurred by the Company. The Management
Committee may, in its reasonable discretion, at the time an Additional Member or
Substituted Member is admitted, close the Company books (as though the Company's
tax year had ended) or make pro rata allocations of loss, income, expenses and
deductions to an Additional Member or Substituted Member for that portion of the
Company's tax year in which a Member was admitted in accordance with the
provisions of Section 706(d) of the Code and the Treasury Regulations
promulgated thereunder.
ARTICLE XIII
DISSOLUTION AND WINDING UP
13.1 DISSOLUTION.
13.1.1 Subject to the provisions of Section 6.8, the Company shall be
dissolved and its affairs wound up, upon the first to occur of the following
events:
(a) the unanimous vote of all Members;
(b) upon the death, insanity, retirement, resignation, or dissolution of a
Member or upon a Member becoming a Bankrupt Member or occurrence of any other
event which terminates the continued membership of a Member in the company (a
"Withdrawal Event"), unless the business of the Company is continued by the
affirmative vote of the remaining Members holding a Majority of the SR Interest
(if any) and the remaining Members holding a Majority of the AGM Interest (if
any) within 90 days after the Withdrawal Event; and
(c) the entry of a decree of dissolution pursuant to Section 18-802 of the
Act.
13.1.2 Notwithstanding anything to the contrary in this Company Agreement,
if the dissolution of the Company is approved by the affirmative vote of all
Members pursuant to Section 13.1.1(a), then all of the Members shall agree in
writing to dissolve the Company as soon as possible (but in any event not more
than ten (10) days) thereafter.
13.1.3 As soon as possible following the occurrence of any of the events
specified in this Article XIII effecting the dissolution of the Company, an
appropriate representative of the Company shall execute a statement of intent to
dissolve in such form as shall be prescribed by the Delaware Secretary of State
and file same with the Delaware Secretary of State's office.
13.1.4 If a Member who is an individual dies or a court of competent
jurisdiction adjudges him to be incompetent to manage his person or his assets,
the Member's executor, administrator, guardian, conservator, or other legal
representative may exercise all of the Member's rights for the purpose of
settling his estate or administering his assets.
13.1.5 Except as expressly permitted in this Company Agreement, a Member
shall not voluntarily resign or take any other voluntary action which directly
causes a Withdrawal Event. Damages for breach of this Section 13.1.5 shall be
monetary damages only, and such damages may be offset against distributions by
the Company to which such resigning Member would otherwise be entitled.
13.2 EFFECT OF DISSOLUTION. Upon the dissolution of the Company which is not
followed by an election pursuant to Section 13.1.1(b) to continue the Company,
the Company shall cease to carry on its business, except insofar as may be
necessary for the winding up of its business, but its separate existence shall
continue until a certificate of dissolution has been issued by the Secretary of
State or until a decree dissolving the Company has been entered by a court of
competent jurisdiction.
13.3 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.
13.3.1 Upon dissolution, an accounting shall be made by the Company's
independent accountants of the accounts of the Company and of the Company's
assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Management Committee shall
immediately proceed to wind up the affairs of the Company.
13.3.2 Subject to Article XIX of this Company Agreement, and if the Company
is dissolved and its affairs are to be wound up, the Management Committee shall:
(a) Sell or otherwise liquidate all of the Company's assets as promptly as
practicable (except to the extent the Management Committee may determine to
distribute any assets to the Members in kind);
(b) Allocate any Net Profits or Net Losses resulting from such sales to the
Members' and Assignee's Capital Accounts in accordance with Article IX hereof;
(c) Discharge all liabilities of the Company, including liabilities to
Members and Assignees who are also creditors, to the extent otherwise permitted
by law, other than liabilities to Members and Assignees for distributions and
the return of capital, and establish such reserves as may be reasonably
necessary to provide for contingent liabilities of the Company (for purposes of
determining the Capital Accounts of the Members and Assignees, the amounts of
such reserves shall be deemed to be an expense of the Company); and
(d) Distribute the Company assets as follows:
(i) First, to all Members and Assignees in an amount equal to their
respective positive Capital Account balances taking into account all Capital
Account adjustments for the Company's taxable year in which the liquidation
occurs; provided, that to the extent the positive Capital Account balance of the
holders of the AGM Interest exceeds the positive Capital Account balance of the
holders of the SR Interest , such excess shall be paid to the holder of the AGM
Interest first, prior to any distribution to the holder of SR Interest; and
(ii) Then, to the Members in the percentages then in effect as set forth in
Section 9.3.1(b)(iv); provided, however, that if the dissolution of the Company
occurs pursuant to Section 13.1.1(d), then the Members shall endeavor to
terminate and dissolve the Company and distribute its assets, so that upon such
distribution the holder of the SR Interest will receive a sum in cash equal to
its Initial Capital Contribution and the holder of the AGM Interest will
receive, in kind, all remaining assets of the Company.
13.3.3 Notwithstanding anything to the contrary in this Company Agreement,
upon a liquidation within the meaning of Section 1.704-l(b)(2)(ii)(g) of the
Regulations, if any Member has a Deficit Capital Account (after giving effect to
all contributions, distributions, allocations and other Capital Account
adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Member's Capital Account shall
not be considered a debt owed by such Member to the Company or to any other
Person for any purpose whatsoever.
13.3.4 Upon completion of the winding up, liquidation and distribution of
the assets, the Company shall be deemed terminated.
13.3.5 The Management Committee shall comply with any applicable
requirements of applicable law pertaining to the winding up of the affairs of
the Company and the final distribution of its assets.
13.4 CERTIFICATE OF DISSOLUTION. When all debts, liabilities and obligations
have been paid and discharged or adequate provisions have been made therefor and
all of the remaining assets have been distributed to the Members, the
certificate of dissolution shall be executed in duplicate and shall be delivered
to the Delaware Secretary of State. Upon the issuance of the certificate of
dissolution, the existence of the Company shall cease, except for the purpose of
suits, other proceedings and appropriate action as provided in the Act. The
Management Committee shall have authority to distribute any Company assets
discovered after dissolution, convey real estate and take such other action as
may be necessary on behalf of and in the name of the Company.
13.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS Except as provided by
law or as expressly provided in this Company Agreement, upon dissolution, each
Member shall look solely to the assets of the Company for the return of its
Capital Contribution. If the Company assets remaining after the payment or
discharge of the debts and liabilities of the Company is insufficient to return
the cash contribution of one or more Members, such Member or Members shall have
no recourse against any other Member, except to the extent any Member knowingly
received a distribution made in violation of this Company Agreement.
ARTICLE XIV
AMENDMENT
14.1 AMENDMENT OF COMPANY AGREEMENT. This Company Agreement may be amended from
time to time only by a written instrument adopted and executed by the unanimous
vote or written consent of all Members.
14.2 AMENDMENTS UPON A MAJOR CAPITAL EVENT. Upon the occurrence of a Major
Capital Event, the Members agree to negotiate in good faith to amend this
Company Agreement as necessary or desirable to reflect any economic or
structural changes to the Company or among the Members which may have resulted
from such Major Capital Event.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 ENTIRE AGREEMENT. This Company Agreement represents the entire agreement
among all the Members and between the Members and the Company and supersedes all
prior oral or written agreements and understandings with respect to the subject
matter of this Company Agreement.
15.2 NO PARTNERSHIP INTENDED FOR NONTAX PURPOSES. The Members have formed the
Company under the Act and expressly do not intend hereby to form a partnership
under either the Delaware Uniform Partnership Act or the Delaware Uniform
Limited Partnership Act. The Members do not intend to be partners one to
another, or partners as to any third party. To the extent any Member, by word or
action, represents to another Person that any other Member is a partner or that
the Company is a partnership, the Member making such wrongful representation
shall be liable to any other Member who incurs personal liability by reason of
such wrongful representation.
15.3 RIGHTS OF CREDITORS AND THIRD PARTIES UNDER COMPANY AGREEMENT. This Company
Agreement is entered into among the Company and the Members for the exclusive
benefit of the Company, its Members and their successors and assignees. This
Company Agreement is expressly not intended for the benefit of any creditor of
the Company or any other Person except to the extent specifically provided
herein. Except and only to the extent expressly provided in this Company
Agreement or by applicable statute, no such creditor or third party shall have
any rights under this Company Agreement or any agreement between the Company and
any Member with respect to any Capital Contribution or otherwise.
15.4 CONFIDENTIALITY. Each of the Members acknowledges that, in its capacity as
such, it will have access to trade secrets and confidential information of the
Company (collectively, the "Information"), and each agrees that such Information
belongs exclusively to the Company. The Information shall include any
information which is or has been disclosed to a Member, or of which such Member
became aware as a consequence of or through its status as a Member of the
Company, which has value to the Company, is not generally known by the public or
the Company's competitors and which is treated by the Company as confidential,
whether or not such material or information is marked `confidential." The
obligation of confidentiality imposed by this Section 15.4 shall not apply to
any information (and, as used in this Agreement, the term Information shall not
include any information) that is: (i) ascertainable from public or published
information or trade sources (provided such information has not been made public
from any act or omission of the disclosing Member); or (ii) required to be
publicly disclosed by law, rule, regulation or court order. Each Member
acknowledges and agrees that the Information is a unique asset of the Company
which is of a confidential nature and has significant value and that the
disclosure of all or any part of the Information to third Persons may be
damaging to the Company. Each Member agrees that, during the term of the
Company, it will keep confidential and not directly or indirectly divulge,
furnish or make accessible to anyone any of the Information, unless (i) the
Management Committee determines that such disclosure would be in the best
interest of the Company; (ii) such disclosure is necessary in order for such
Member to enforce its rights or perform its obligations under this Agreement,
(iii) such disclosure is required by law, rule, regulation or court order or by
rule of any stock exchange or similar entity listing the securities of the
Member or an Affiliate of such Member, or (iv) such disclosure is to financial
representatives, counsel, accountants or business advisors of such Member or to
a prospective acquiror of such Member's or any of its parent's business or
assets, provided that such Persons agree to be bound by a similar, appropriate
confidentiality agreement.
15.5 AGREEMENT, EFFECT OF INCONSISTENCIES WITH ACT. For and in consideration of
the mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Members hereby agree to the terms and conditions of this Company
Agreement, as it may from time to time be amended according to its terms. It is
the express intention of the Members that this Company Agreement shall be the
sole source of agreement among the Members, and, except to the extent a
provision of this Company Agreement expressly incorporates federal income tax
rules by reference to Sections of the Code or Regulations or is expressly
prohibited or ineffective under the Act, this Company Agreement shall govern,
even when inconsistent with, or different than, the provisions of the Act or any
other law or rule. To the extent any provision of this Company Agreement is
prohibited or ineffective under the Act, this Company Agreement shall be
considered amended to the smallest degree possible in order to make the
Agreement effective under the Act. In the event the Act is subsequently amended
or interpreted in such a way to make any provision of this Company Agreement
that was formerly invalid valid, such provision shall be considered to be valid
from the effective date of such interpretation or amendment. The parties hereby
agree that each party shall be entitled to rely on the provisions of this
Company Agreement, and no party shall be liable to the Company or to any Member
for any action or refusal to act taken in good faith reliance on the terms of
this Company Agreement. The Members and the Company hereby agree that the duties
and obligations imposed on the Company and the Members as such shall be those
set forth in this Company Agreement, which is intended to govern the
relationship among the Company and the Members, notwithstanding any provision of
the Act or common law to the contrary.
15.6 NOTICE.
15.6.1 Any notice to any Member shall be at the address of such Member set
forth in APPENDIX A hereto or such other mailing address of which such Member
shall advise the Company in writing. Any notice to the Company shall be at the
principal office of the Company as set forth in Section 1.6 hereof or such other
address as amended by the Management Committee, upon due notice to each Member
in accordance with this Section 15.6.
15.6.2 Any notice hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered, sent by overnight courier or sent by
United States mail, or by facsimile transmission, and will be deemed received,
(i) if sent by certified or registered mail, return receipt requested, when
actually received, (ii) if sent by overnight courier, when actually received,
(iii) if sent by facsimile transmission on the date sent, and (iv) if delivered
by hand, on the date of receipt.
15.6.3. Numerical or alphabetic references to articles, sections,
paragraphs, clauses, schedules, exhibits and appendices in this agreement are to
articles, sections, paragraphs, clauses, schedules, exhibits and appendices of
this Company Agreement unless otherwise stated.
ARTICLE XVI
REMEDY PROVISIONS
16.1 TRIGGERING EVENT. Subject to the provisions of Section 6.8, upon the
occurrence of a Triggering Event, the holders of the AGM Interest will be
entitled to enforce the provisions of this Company Agreement specifically, to
recover damages by reason of any breach of any provision of this Company
Agreement and to exercise all other rights to which they may be entitled. The
Company and its Members agree and acknowledge that money damages may not be an
adequate remedy for breach of the provisions of this Company Agreement and that
the holders of the AGM Interest may in their sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Company Agreement.
16.2 MANAGEMENT COMMITTEE.
16.2.1 In addition to any other remedies provided by this Company
Agreement, and subject to the provisions of Section 6.8, if at any time the
unpaid Accrual exceeds the Accrual Threshold, or upon the occurrence of a
Triggering Event, the holders of the AGM Interest voting separately as a class
shall have the right to elect a majority of the representatives to the
Management Committee. Whenever the holders of the AGM Interest shall be entitled
to elect such representatives in accordance with the terms of this Section 16.2,
then at the request of a holders of a Majority of the AGM Interest, the
secretary of the Company (or if at the time the Company has no secretary, then
the chief executive officer or president of the Company) shall call a special
meeting of the holders of the AGM Interest, such special meeting to be held
within 60 days after the date on which the Accrual is equal to or exceeds the
Accrual Threshold or such Triggering Event occurs and at the request of the
holders of a Majority of the AGM Interest, for the purpose of enabling the
holders of the AGM Interest to elect such representatives to the Management
Committee; provided, however, that such special meeting need not be called if
the holders of the AGM Interest have duly elected representatives by a written
consent or power of attorney executed by holders of at least a Majority of the
AGM Interest or otherwise. At any such special meeting, the presence, in person
or by proxy, of a Majority of the AGM Interest shall be required and be
sufficient to constitute a quorum for the election of any Management Committee
representative and the affirmative vote of Majority of the AGM Interest so
present at such meeting shall be sufficient to elect any such representative.
16.2.2 Immediately after the date on which the Accrual equals or exceeds
the Accrual Threshold or such Triggering Event occurs and at the request of the
holders of a Majority of the AGM Interest, the number of representatives to the
Management Committee shall be set at eleven, with five of such representatives
being representatives then in office or otherwise selected by the holders of a
Majority of the SR Interest, and six of such representatives being selected by
the holders of a Majority of the AGM Interest. Any representative elected by the
holders of the AGM Interest shall cease to serve as a representative whenever no
unpaid Accrual exists and all Accrual amounts have been paid in full and any
Triggering Event has been cured. If, prior to the end of the term of any
representative elected by the holders of the AGM Interest, a vacancy in the
office of such representative shall occur by reason of death, resignation,
removal or disability, or for any other cause, such vacancy shall be filled for
the unexpired term by the remaining representative or representatives elected by
the holders of the AGM Interest, or in the event there is no such remaining
representative, by a vote of the holders of the AGM Interest as provided in this
Section 16.2.2. Any representative elected by the holders of the AGM Interest
may be removed with or without cause only by the vote of the holders of a
Majority of the AGM Interest.
I 16.2.3 Subject to Article XIX of this Company Agreement, and
notwithstanding the foregoing, the holders of the AGM Interest hereby waive any
rights they may have under this Section 16.2 of the Company Agreement by reason
of the failure of the Company to pay a distribution pursuant to Section 9.3.1(a)
during the period from April 15, 2000 through October 19, 2000, or by reason of
the unpaid Accrual exceeding the Accrual Threshold during the period from April
15, 2000 through October 19, 2000.
ARTICLE XVII
REDEMPTION OF THE AGM INTEREST
17.1 OPTIONAL REDEMPTION BY THE COMPANY. At any time and from time to time after
the 30th anniversary of the Effective Date, the Company may redeem all but not
less than all of the AGM Interest at a price equal to the Redemption Price. If
the Company desires to redeem all of the AGM Interest as permitted by this
Section 17.1, the Company shall mail holders of the AGM Interest written notice
of such determination at least 60 days and not more than 90 days prior to the
date specified in such notice for redemption of the AGM Interest.
17.2 MANDATORY REDEMPTION UPON REQUEST OF A HOLDER. Subject to Section 6.8, at
any time and from time to time on or after the fifth anniversary of the
Effective Date, any holder of the AGM Interest may provide the Company with
written notice of the holder's intent to require the Company to redeem all or
part of the AGM Interest held by such holder. The Company shall redeem all of
the AGM Interest specified in such redemption notice, at a price equal to the
Redemption Price, on a date set by the Company, which shall be within 15 days of
the date of the holder's redemption notice. For purposes of this Article XVII,
the "Redemption Date" shall be the date specified by the Company for redemption
of the AGM Interest pursuant to Sections 17.1 and 17.2.
17.3 REDEMPTION PRICE. The Company will be obligated on the Redemption Date to
pay to the holders of the AGM Interest being redeemed (upon surrender by such
holder at the Company's principal office of the certificate representing such
AGM Interest) an amount in immediately available funds equal to the Redemption
Price. If the funds of the Company legally available for redemption of the AGM
Interest on the Redemption Date are insufficient to redeem the AGM Interest to
be redeemed on such date, those funds which are legally available will be used
to redeem the maximum possible amount of the AGM Interest ratably among the
holders of the AGM Interest to be redeemed based upon the aggregate amounts to
be paid to each such holder. At any time thereafter, when additional funds of
the Company are legally available for the redemption of the AGM Interest, such
funds will immediately be used to redeem the balance of the AGM Interest which
the Company has become obligated to redeem on the Redemption Date but which it
has not redeemed.
17.4 DISTRIBUTIONS AFTER REDEMPTION DATE. Following the establishment of a
Redemption Date by the Company, the Company may set aside all funds necessary
for such redemption or reserve such funds by means of an irrevocable letter of
credit, separate and apart from the other funds of the Company, in trust for the
benefit of the holders of the AGM Interest to be redeemed, pro rata, so as to be
and continue to be available therefor, then from and after the Redemption Date,
the AGM Interest shall no longer be deemed outstanding, the right to receive
distributions thereon shall cease to accrue and all rights with respect to such
AGM Interest subject to redemption shall forthwith at the close of business on
such Redemption Date cease and terminate except only the right of the holders
thereof to receive the Redemption Price of the AGM Interest so to be redeemed.
Any moneys so set aside by the Company and unclaimed at the end of three years
from the date fixed for redemption shall revert to the general funds of the
Company and the right of holders of the AGM Interest to receive the Redemption
Price will be unaffected thereby.
17.5 CERTIFICATES. In case fewer than the total amount of the AGM Interest
represented by any certificate are redeemed, a new certificate representing the
amount of the AGM Interest shall be issued to the holder thereof without cost to
such holder as soon as practicable after surrender of the certificate
representing the redeemed the AGM Interest.
17.6 OTHER REDEMPTIONS OR ACQUISITIONS. Without consent of the holders of a
Majority of the AGM Interest, the Company shall not redeem or otherwise acquire
any of the AGM Interest, except (i) as expressly authorized herein or (ii)
pursuant to a purchase offer made pro-rata to all holders of the AGM Interest on
the basis of the amount of the AGM Interest held by each such holder.
ARTICLE XVIII
GRANT OF PUT OPTION
18.1 GRANT OF PUT OPTION. SRSC hereby grants to the holder of the AGM Interest
and its successors and assigns, an option (the "Put Option") giving the holder
of the AGM Interest and its successors and assigns the right to sell to SRSC,
and its successors or assigns (and requiring SRSC and its successors and assigns
to purchase), all or any portion of the AGM Interest, in exchange for the Put
Option Consideration. Subject to Section 6.8, the Put Option is exercisable,
from time to time and in amounts as set forth below, at any time and from time
to time on or after the fifth anniversary of the Effective Date, and
concurrently with the time that Valhi makes any principal payment on the Valhi
Loans, unless the Company has previously redeemed in full all of the AGM
Interest pursuant to Article XVII. The holder of the AGM Interest may exercise
the Put Option by giving written notice to SRSC of its intent to do so (the "Put
Notice"). The Put Notice shall include a statement of the holder of the AGM
Interest's determination of the Put Option Consideration and that proportion of
the AGM Interest that shall be sold. The portion of the AGM Interest sold
pursuant to any Put Notice (such portion to be determined as if all of the AGM
Interest originally issued to AGM were then outstanding) shall not exceed the
proportion that the principal payment giving rise to such Put Notice bears to
the original principal balance of the Valhi Loans.
18.2 CLOSING OF PUT OPTION. The closing of the sale of the AGM Interest pursuant
to the Put Option shall be held at the offices of the Company on the date set
forth by the holder of the AGM Interest in the Put Notice (unless otherwise
delayed in accordance with the provisions of Section 18.3 below) or at such
other time and place as the holders of the AGM Interest and SRSC may agree. At
the closing, SRSC shall pay to the holder of the AGM Interest the Put Option
Consideration by wire transfer of funds, and the holder of the AGM Interest
shall deliver an assignment of the AGM Interest in a form reasonably acceptable
to SRSC, pursuant to which the AGM Interest will be transferred to SRSC or its
permitted designee free and clear of any liens or encumbrances (other than
encumbrances that secure indebtedness of the Company).
18.3 REGULATORY APPROVAL. The consummation of the assignment of the AGM Interest
pursuant to the exercise of the Put Option may be delayed until the expiration
or earlier termination of any waiting period, and the receipt of any approval,
imposed or required by any statute or any regulation promulgated by any
governmental or regulatory authority. If it is determined that any such waiting
period or prior approval is required to be complied with or obtained, then each
of SRSC and the holder of the AGM Interest the shall use their diligent best
efforts (a) in connection with the filing or providing of any information in
connection therewith (including, without limitation, a notice and report under
the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended and (b) to
obtain the approval required.
ARTICLE XIX
SNAP-BACK PROVISIONS
19.1 SNAP-BACK PROVISIONS. Subject to Section 6.8, if, at any time, either (i)
the Company fails to make the Beet Payment Reduction (and hence generates
Distributable Cash in any Fiscal Year in the aggregate amount of less than $25
million) or (ii) the unpaid Accrual exceeds the Accrual Threshold, then, at the
option of the holders of the AGM Interest in their sole discretion, which option
may be exercised by said holders by giving notice to SRSC and the Company
pursuant to Section 15.6 of this Company Agreement, any one or more of the
provisions noted below in this Article XIX shall immediately, and retroactively
to January 3, 1997, become applicable and operative and supersede the indicated
portion or section of this Company Agreement, and such superseded portion or
section of this Company Agreement shall thereafter be null and void; provided,
however, that any such voidance or nullification shall not relieve either the
Company or SRSC of their respective obligations to fully carry out and take all
actions provided for and consistent with any SRSC Annual Irrevocable Cash Plan
previously approved by SRSC's Board of Directors for any given Fiscal Year.
19.1.1. The definition of Accrual contained in Article II of this Company
Agreement would be amended to read in its entirety as follows: "ACCRUAL - shall
mean the sum of (i) the positive excess, if any, of (A) the product of
$2,224,781 times the cumulative number of months which have elapsed during any
Fiscal Year of the Company, commencing with January 1, 1997, less (B) the cash
distributions to all Members pursuant to Section 9.3.1(a) in connection with
such months and less the cash distributions pursuant to Section 9.3.1(b)(i) for
the Fiscal Year relating to such months, plus (ii) interest on any amount
determined pursuant to clause (i), compounded annually, at an annual rate of
10.145%, calculated from the date cash distributions for such month are or would
have been made pursuant to Section 9.3.1(a) to the date the Accrual relating to
such date is actually distributed to the Members pursuant to Section 9.3.1;
provided, however, that the Deferral shall not be included in any Accrual."
19.1.2. The definition of Accrual Threshold contained in Article II of this
Company Agreement would be amended to read in its entirety as follows: "ACCRUAL
THRESHOLD - means the amount of $10,526,316."
19.1.3. The (i) definition of Deferral would be added to Article II of this
Company Agreement to read in its entirety as follows: "DEFERRAL - means the sum
of (a) $30,546.18, together with interest on such amount at a rate of 10.145%
per annun, compounded annually, from May 14, 1997, and (b) $6,556,152.00,
together with interest on such amount at a rate of 5.0725% per annun, compounded
annually, from March 27, 1998," and (ii) the definition of Retained Amounts
would be amended to read in its entirety as follows: "RETAINED AMOUNTS - means
the sum of (i) 95% of any Accrual, (ii) 100% of any Deferral, plus (iii) 100% of
any interest accrued on any such Deferral."
19.1.4. Section 9.3.1(b) of this Company Agreement would be amended in its
entirety to read as follows:
"(b) Within 10 days following the completed audit of the books of the
Company for each Fiscal Year commencing with Fiscal Year 1997, the Company will
determine its actual Distributable Cash for such Fiscal Year and provide written
notice of such determination to each Member. If the Company's actual
Distributable Cash for such Fiscal Year (based on such audit) exceeds amounts
previously distributed to Members for such Fiscal Year pursuant to Section
9.3.1(a) above, then, within 30 days following such audit, the Company shall
distribute to its Members cash in an aggregate amount equal to 100% of such
actual Distributable Cash for such Fiscal Year (based on the Company's audit)
less amounts actually distributed pursuant to Section 9.3.1(a) above. Such
distributions shall be paid in the following percentages and priority:
(i) 95% to the holders of the AGM Interest and 5% to the holders of the SR
Interest, until the Members have received, pursuant to this Section 9.3.1(b)(i)
and Section 9.3.1(a), cash distributions for such Fiscal Year in an aggregate
amount equal to the lesser of (A) the Company's Distributable Cash for such
Fiscal Year and (B) $26,697,372 plus any unpaid Accrual as of the beginning of
such Fiscal Year, and
(ii) next, 95% to the holders of the AGM Interest and 5% to the holders of
the SR Interest, until such holders have received an aggregate amount of
$15,789,474 (on a cumulative basis for all Fiscal Years of the Company
commencing with Fiscal Year 1997), provided that the Members shall have no right
to any distribution pursuant to this Section 9.3.1(b)(ii) for any Fiscal Year
following the Company's 2002 Fiscal Year, whether or not the Members have
received all or any part of the distribution pursuant to this Section
9.3.1(b)(ii) (provided that this shall not affect the Member's rights to receive
any Deferral amount after the Company's 2002 Fiscal Year, to the extent such
Deferral amount arose prior to the Company's 2002 Fiscal Year), and
(iii) next, 5% to the holders of the AGM Interest and 95% to the holders of
the SR Interest for the Company's 1997 Fiscal Year through and including the
2002 Fiscal Year, or 10% to the holders of the AGM Interest and 90% to the
holders of the SR Interest, for the Company's 2003 Fiscal Year and thereafter.
To the extent the amounts distributed to the Members pursuant to Section
9.3.1(a) above exceed the Company's actual Distributable Cash for such Fiscal
Year (based on the Company's audit), the Members shall be obligated to return to
the Company, within 10 days following the completed audit of the books of the
Company, an amount of cash equal to any excess of the aggregate amount actually
distributed during such Fiscal Year to each Member (pursuant to Section 9.3.1(a)
above) over such Member's respective share of the Company's actual Distributable
Cash. The parties agree that, in the event any Member of the Company is
obligated to return any amounts pursuant to the provisions of this Section
9.3.1(b), the Company may, at its option, withhold such amounts from amounts to
be distributed to such Member pursuant to Section 9.3.1 or otherwise."
19.1.5. The phrase "Section 9.3.1(b)(iv)" contained in each of Section
9.1.1(c), 9.1.2(d) and 13.3.2(d)(ii) of this Company Agreement would be amended
to read "Section 9.3.1(b)(iii)."
19.1.6. Section 9.3.1 (d) of this Company Agreement shall be renumbered as
Section 9.3.1(e), and Section 9.3.1(d) of this Company Agreement would be
amended in its entirety to read as follows:
"(d) Notwithstanding the foregoing,
(i) the holders of the AGM Interest may not receive any distribution for
either of the Company's 1997 or 1998 Fiscal Years that, when added to all other
distributions for such Fiscal Year, will exceed an aggregate of $25,362,500, and
(ii) until September 30, 2005, no amounts shall be distributed to the
holders of the AGM Interest pursuant to the provisions of Sections 9.3.1(b)(ii)
and (b)(iii) above.
The amounts that would otherwise have been distributed to the holders of the AGM
Interest, but for the provisions of Sections 9.3.1(d)(i) and (d)(ii) above,
(which, including interest, is referred to as the Deferral), shall instead be
paid dollar for dollar to the holders of the SR Interest at the times set forth
in Section 9.3.1(a) or Section 9.3.1(b), as appropriate. Following September 30,
2005, amounts which would otherwise be distributed to the holders of the SR
Interest pursuant to Sections 9.3.1(b)(ii) and (b)(iii) shall be reduced, and
such distribution shall instead be paid dollar for dollar to the holders of the
AGM Interest, until the date an aggregate amount equal to such Deferral is
actually paid to the holders of the AGM Interest pursuant to this Section
9.3.1(d)."
19.1.7. The first sentence of Section 9.3.2 of this Company Agreement would
be amended in its entirety to read as follows: "Except as provided below, the
Company shall distribute any Distributable Cash from a Major Capital Event, (i)
first, to the Members in an amount equal to any unpaid Accrual, 95% to the
holders of the AGM Interest and 5% to the holders of the SR Interest, (ii)
second, to the holders of the AGM Interest, until such holders have received an
amount equal to any Deferral, (iii) third, to the Members pro rata in accordance
with their Sharing Ratios, until each Member has received an amount under this
Section 9.3.2 equal in the aggregate to the Capital Contribution made by each
Member, and (iv) fourth, to the Members in the percentages then in effect under
Section 9.3.1(b)(iii) ."
19.1.8. Section 16.2.3 of this Company Agreement would be deleted in its
entirety.
* * * * * * *
* * * * * * * * * *
CERTIFICATE
* * * * * * * * * *
The undersigned hereby agree, acknowledge and certify that the foregoing Amended
and Restated Company Agreement constitutes the Amended and Restated Company
Agreement of The Amalgamated Sugar Company LLC, adopted by the Company and its
Members January 3, 1997, to be effective for tax and accounting purposes as of
December 31, 1996, as amended and restated through October 14, 2005.
COMPANY:
THE AMALGAMATED SUGAR COMPANY LLC
By: /s/Dave Budge
-----------------------------------------------------
Dave Budge
Vice President
MEMBERS:
SNAKE RIVER SUGAR COMPANY
By: /s/Dave Budge
-----------------------------------------------------
Dave Budge
Vice President
AMALGAMATED COLLATERAL TRUST
By: ASC Holdings, Inc., Company Trustee
By: /s/Gregory M. Swalwell
--------------------------------------------
Gregory M. Swalwell
Vice President
Appendix A
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Member Initial Initial Initial
Capital Shares Representatives to
Contribution Of Management
and Total Committee
Value Capital
- ------------------------------------------------ ---------------------- ---------------- --------------------------
Amalgamated Collateral Trust $250,000,0000 94.7% None
c/o Wilmington Trust
Company, as Resident Trustee
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
And
c/o ASC Holdings, Inc., as Company Trustee
Three Lincoln Center
5430 LBJ Freeway
Suite 1700
Dallas, Texas 75240
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With a copy to:
Valhi, Inc.
Three Lincoln Center
5430 LBJ Freeway
Suite 1700
Dallas, Texas 75240
Attn: General Counsel
- ------------------------------------------------ ---------------------- ---------------- --------------------------
Snake River Sugar Company $14,000,000 5.3% 1. Terry Ketterling
Attn: Ralph C. Burton, President and Chief 2. Scott Stevenson
Executive Officer. 3. Duane Ramseyer
3184 Elder Street 4. Doug Maag
Boise, Idaho 83705 5. Mike Driscoll
6. Todd Merrigan
7. Duane Grant
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